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VALIDITY OF CONTRACTS

GENERAL RULE: A DEFECTIVE NOTARIZATION DOES NOT AFFECT THE VALIDITY


OF A CONTRACT.
1.

CIVIL CODE, ARTICLES 1356 TO 1358

Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. However, when the law
requires that a contract be in some form in order that it may be valid or enforceable, or that a
contract be proved in a certain way, that requirement is absolute and indispensable. In such
cases, the right of the parties stated in the following article cannot be exercised. (1278a)
Art. 1357. If the law requires a document or other special form, as in the acts and contracts
enumerated in the following article, the contracting parties may compel each other to observe
that form, once the contract has been perfected. This right may be exercised simultaneously with
the action upon the contract. (1279a)
Art. 1358. The following must appear in a public document:

The former Municipality of Marikina in the Province of Rizal (now City of Marikina, Metro
Manila) used to own a parcel of land located in Barrio Concepcion of the said municipality
covered by Original Certificate of Title (OCT) No. 6293 of the Register of Deeds of Rizal. The
said property was subdivided into three (3) lots, namely, lots A, B and C, per subdivision plan
(LRC) Psd-4571.4
On January 14, 1966, the Municipal Council of Marikina passed Resolution No. 9, series of 1966
which authorized the sale through public bidding of Municipal Lots A and C.
On April 25, 1966, a public bidding was conducted wherein Pedro Gonzales was the highest
bidder. Two days thereafter, or on April 27, 1966, the Municipal Council of Marikina issued
Resolution No. 75 accepting the bid of Pedro. Thereafter, a deed of sale was executed in favor of
the latter which was later forwarded to the Provincial Governor of Rizal for his approval. The
Governor, however, did not act upon the said deed.
Sometime in September 1966, Pedro sold to Marcos Perez a portion of Lot C, denominated as Lot
C-3, which contains an area of 375 square meters. The contract of sale was embodied in a Deed
of Sale5 which, however, was not notarized. To segregate the subject property from the
remaining portions of Lot C, Marcos had the same surveyed wherein a technical description of
the subject lot was prepared by a surveyor.6

(1) Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property; sales of real property or of an interest
therein a governed by Articles 1403, No. 2, and 1405;

Subsequently, Pedro and Marcos died.

(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal
partnership of gains;

On February 7, 1992, the Municipality of Marikina, through its then Mayor Rodolfo Valentino,
executed a Deed of Absolute Transfer of Real Property over Lots A and C in favor of the Estate
of Pedro C. Gonzales.7 On June 25, 1992, Transfer Certificate of Title (TCT) No. 223361, covering
Lot C, was issued in the name of the said estate.8

(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in
writing, even a private one. But sales of goods, chattels or things in action are governed by
Articles, 1403, No. 2 and 1405. (1280a)

2.

THE ESTATE OF PEDRO C. GONZALES, V. THE HEIRS OF MARCOS PEREZ,


G.R. NO. 169681, 5 NOVEMBER 2009

This resolves the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court
praying for the nullification of the Decision1 of the Court of Appeals (CA) dated April 25, 2005
in CA-G.R. CV No. 60998 and its Resolution2 dated September 14, 2005. The challenged Decision
of the CA reversed and set aside the judgment of the Regional Trial Court (RTC) of Marikina
City, Branch 272 in Civil Case No. 94-57-MK while its assailed Resolution denied petitioners'
motion for reconsideration.
The antecedent facts are as follows:

Subsequently, herein petitioners executed an extra-judicial partition wherein Lot C was


subdivided into three lots. As a result of the subdivision, new titles were issued wherein the 370square-meter portion of Lot C-3 is now denominated as Lot C-1 and is covered by TCT No.
2444479 and the remaining 5 square meters of the subject lot (Lot C-3) now forms a portion of
another lot denominated as Lot C-2 and is now covered by TCT No. 244448.10
On October 1, 1992, herein respondents sent a demand letter to one of herein petitioners asking
for the reconveyance of the subject property.11 However, petitioners refused to reconvey the
said lot. As a consequence, respondents filed an action for "Annulment and/or Rescission of
Deed of Absolute Transfer of Real Property x x x and for Reconveyance with Damages."12
On February 2, 1998, the RTC rendered its Decision with the following dispositive portion:
WHEREFORE, foregoing premises, judgment is hereby rendered as follows:
1. DISMISSING the complaint subject of the case in caption for lack of merit;
2. DECLARING VALID both Transfer Certificates of Title Nos. 244447 and 244448 issued by the
Register of Deeds of Marikina;
3. DISMISSING the defendants' counterclaim.
No pronouncement as to costs.
LEGFORMS ALS3C1415 | 1

SO ORDERED.13
The RTC ruled that since the Deed of Sale executed between Pedro and Marcos was not
notarized, the same is considered void and of no effect. In addition, the trial court also held that
Pedro became the owner of the subject lot only on February 7, 1992; as such, he could not have
lawfully transferred ownership thereof to Marcos in 1966.
Herein respondents appealed the RTC Decision to the CA contending that the RTC erred in
relying only on Articles 1356 and 1358 of the Civil Code. Instead, respondents assert that the
RTC should also have applied the provisions of Articles 1357, 1403 (2), 1405 and 1406 of the
same Code.

petitioners' predecessor-in-interest, Pedro, in September 1966 because, during that time, Pedro
had not yet acquired ownership of the subject lot. Petitioners' assertion is based on the premise
that as of February 29, 1968, the Deed of Sale between Pedro and the Municipality of Marikina
was still subject to approval by the Provincial Governor of Rizal, as required under Section 2196
of the Revised Administrative Code. Considering that on the supposed date of sale in favor of
Marcos, the requisite approval of the Provincial Governor was not yet secured, petitioners
conclude that Pedro could not be considered as the owner of the subject property and, as such,
he did not yet possess the right to transfer ownership thereof and, thus, could not have lawfully
sold the same to Marcos.
The Court does not agree.

On April 25, 2005, the CA rendered its presently assailed Decision disposing as follows:

Section 2196 of the Revised Administrative Code provides:

WHEREFORE, premises considered, the instant Appeal is hereby GRANTED and the assailed
Decision dated February 2, 1998 is REVERSED and SET ASIDE. TCT No. 244447 and partially,
TCT No. 244448, with respect to five (5) square meters, are declared NULL and VOID and
defendants-appellees are ordered to reconvey in favor of the plaintiffs-appellants the subject
property covered by said Transfer Certificates of Title (five square meters only with respect to
TCT No. 244448). The trial court's dismissal of defendants-appellees' counterclaim is, however,
AFFIRMED.

SECTION 2196. Execution of deeds. When the government of a municipality is a party to a


deed or an instrument which conveys real property or any interest therein or which creates a
lien upon the same, such deed or instrument shall be executed on behalf of the municipal
government by the mayor, upon resolution of the council, with the approval of the governor.

SO ORDERED.14
The CA held that a sale of real property, though not consigned in a public instrument, is
nevertheless valid and binding among the parties and that the form required in Article 1358 of
the Civil Code is not essential to the validity or enforceability of the transactions but only for
convenience.
Petitioners filed a motion for reconsideration, but the same was denied by the CA in its
Resolution of September 14, 2005 on the ground that the said motion was filed out of time.
Hence, the present petition with the following assignment of errors:
WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, ITS FINDINGS OF FACT
RUN COUNTER TO THOSE OF THE TRIAL COURT, THUS, IT HAS DECIDED THE CASE IN
A WAY NOT IN ACCORD WITH LAW AND JURISPRUDENCE.
WITH DUE RESPECT, THE ALLEGED DEED OF SALE IS SUSPECT AND RIDDEN WITH
INCONSISTENCIES. IN FACT, THE LOWER COURT HELD THAT THE DEED OF SALE
FAILED TO MEET THE SOLEMNITY REQUIREMENTS PROVIDED UNDER THE LAW FOR
ITS VALIDITY.
WITH DUE RESPECT, THE COURT OF APPEALS ERRED IN DISREGARDING THE
FINDINGS OF FACT AND THE APPLICATION OF LAW BY THE REGIONAL TRIAL COURT
THAT UNDER THE PURPORTED DEED OF SALE THE VENDOR COULD NOT HAVE
TRANSFERRED OWNERSHIP.15
In their first and last assigned errors, petitioners contend that Marcos, who is respondents'
predecessor-in-interest, could not have legally bought the disputed parcel of land from

In Municipality of Camiling v. Lopez,16 the Court found occasion to expound on the nature and
effect of the provincial governor's power to approve contracts entered into by a municipal
government as provided for under Section 2196 of the Revised Administrative Code. The Court
held, thus:
x x x The approval by the provincial governor of contracts entered into and executed by a
municipal council, as required in [S]ection 2196 of the Revised Administrative Code, is part of
the system of supervision that the provincial government exercises over the municipal
governments. It is not a prohibition against municipal councils entering into contracts regarding
municipal properties subject of municipal administration or control. It does not deny the power,
right or capacity of municipal councils to enter into such contracts; such power or capacity is
recognized. Only the exercise thereof is subject to supervision by approval or disapproval, i.e.,
contracts entered in pursuance of the power would ordinarily be approved if entered into in
good faith and for the best interests of the municipality; they would be denied approval if found
illegal or unfavorable to public or municipal interest. The absence of the approval, therefore,
does not per se make the contracts null and void.17
This pronouncement was later reiterated in Pechueco Sons Company v. Provincial Board of
Antique,18 where the Court ruled more emphatically that:
In other words, as regards the municipal transactions specified in Section 2196 of the Revised
Administrative Code, the Provincial Governor has two courses of action to take either to
approve or disapprove the same. And since absence of such approval does not necessarily
render the contract entered into by the municipality null and void, the transaction remains
voidable until such time when by subsequent unfavorable action of the governor, for reasons of
public interest, the contract is thereby invalidated.19
It is clear from the above-quoted pronouncements of the Court that, pending approval or
disapproval by the Provincial Governor of a contract entered into by a municipality which falls
under the provisions of Section 2196 of the Revised Administrative Code, such contract is
considered voidable. In the instant case, there is no showing that the contract of sale entered into
LEGFORMS ALS3C1415 | 2

between Pedro and the Municipality of Marikina was ever acted upon by the Provincial
Governor. Hence, consistent with the rulings enunciated above, the subject contract should be
considered voidable. Voidable or annullable contracts, before they are set aside, are existent,
valid, and binding, and are effective and obligatory between the parties.20
In the present case, since the contract was never annulled or set aside, it had the effect of
transferring ownership of the subject property to Pedro. Having lawfully acquired ownership of
Lots A and C, Pedro, in turn, had the full capacity to transfer ownership of these parcels of land
or parts thereof, including the subject property which comprises a portion of Lot C.
It is wrong for petitioners to argue that it was only on June 25, 1992, when TCT No. 223361
covering Lot C was issued in the name of the estate of Pedro, that he became the owner thereof.
Article 1496 of the Civil Code provides:
The ownership of the thing sold is acquired by the vendee from the moment it is delivered to
him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee.
In conjunction with the above-stated provision, Article 1497 of the Civil Code states that:
The thing sold shall be understood as delivered when it is placed in the control and possession
of the vendee.
In the present case, there is no dispute that Pedro took control and possession of the said lot
immediately after his bid was accepted by the Municipal Government of Marikina. In fact,
herein petitioners, in their Answer with Compulsory Counterclaim admit that both Pedro and
Marcos, together with their respective heirs, were already occupying the subject property even
before the same was sold to Pedro and that, after buying the same, Pedro allowed Marcos and
his family to stay thereon.21 This only shows that upon perfection of the contract of sale
between the Municipality of Marikina and Pedro, the latter acquired ownership of the subject
property by means of delivery of the same to him.
Hence, the issuance of TCT No. 223361, as well as the execution of the Deed of Absolute Transfer
of Real Property on February 7, 1992 by the Municipal Mayor of Marikina, could not be
considered as the operative acts which transferred ownership of Lot C to Pedro. Pedro already
acquired ownership of the subject property as early as 1966 when the same was delivered to him
by the Municipality of Marikina, and the execution of the Deed of Absolute Transfer of Real
Property as well as the consequent issuance of TCT No. 223316 are simply a confirmation of
such ownership.1avvphi1
It may not be amiss to point out at this juncture that the Deed of Absolute Transfer of Real
Property executed by the Mayor of Marikina was no longer subject to approval by the Provincial
Governor of Rizal because Marikina already became part of Metro Manila on November 7,
1975.22 On December 8, 1996, Marikina became a chartered city.23
In their second assignment of error, petitioners question the authenticity and due execution of
the Deed of Sale executed by Pedro in favor of Marcos. Petitioners also argue that even
assuming that Pedro actually executed the subject Deed of Sale, the same is not valid because it
was not notarized as required under the provisions of Articles 1403 and 1358 of the Civil Code.

The Court is not persuaded.


The RTC, in its abbreviated discussion of the questions raised before it, did not touch on the
issue of whether the Deed of Sale between Pedro and Marcos is authentic and duly executed.
However, the CA, in its presently assailed Decision, adequately discussed this issue and ruled as
follows:
x x x In the present case, We are convinced that plaintiffs-appellants [herein respondents] have
substantially proven that Pedro, indeed, sold the subject property to Marcos for P9,378.75. The
fact that no receipt was presented to prove actual payment of consideration, in itself, the absence
of receipts, or any proof of consideration, would not be conclusive since consideration is always
presumed. Likewise, the categorical statement in the trial court of Manuel P. Bernardo, one of
the witnesses in the Deed of Sale, that he himself saw Pedro sign such Deed lends credence. This
was corroborated by another witness, Guillermo Flores. Although the defendants-appellees
[herein petitioners] are assailing the genuineness of the signatures of their parents on the said
Deed, they presented no evidence of the genuine signatures of their parents as would give this
Court a chance to scrutinize and compare it with the assailed signatures. Bare allegations,
unsubstantiated by evidence, are not equivalent to proof under our Rules.24
In the instant petition, petitioners would have us review the factual determinations of the CA.
However, settled is the rule that the Court is not a trier of facts and only questions of law are the
proper subject of a petition for review on certiorari in this Court.25 While there are exceptions to
this rule,26 the Court finds that the instant case does not fall under any of them. Hence, the
Court sees no reason to disturb the findings of the CA, which are supported by evidence on
record.
On the question of whether the subject Deed of Sale is invalid on the ground that it does not
appear in a public document, Article 1358 of the same Code enumerates the acts and contracts
that should be embodied in a public document, to wit:
Art. 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property; sales of real property or of an interest
therein are governed by Articles 1403, No. 2 and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal
partnership of gains;
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;
and
(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in
writing, even a private one. But sales of goods, chattels or things in action are governed by
Articles 1403, No. 2 and 1405.
On the other hand, pertinent portions of Article 1403 of the Civil Code provide as follows:
LEGFORMS ALS3C1415 | 3

Art. 1403. The following contracts are unenforceable, unless they are ratified:
xxxx
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases an agreement hereafter made shall be unenforceable by action, unless the same,
or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by
his agent; evidence, therefore, of the agreement cannot be received without the writing, or a
secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
xxxx
(e) An agreement for the leasing for a longer period than one year, or for the sale of real
property or of an interest therein; x x x27
Under Article 1403(2), the sale of real property should be in writing and subscribed by the party
charged for it to be enforceable.28 In the case before the Court, the Deed of Sale between Pedro
and Marcos is in writing and subscribed by Pedro and his wife Francisca; hence, it is enforceable
under the Statute of Frauds.
However, not having been subscribed and sworn to before a notary public, the Deed of Sale is
not a public document and, therefore, does not comply with Article 1358 of the Civil Code.
Nonetheless, it is a settled rule that the failure to observe the proper form prescribed by Article
1358 does not render the acts or contracts enumerated therein invalid. It has been uniformly
held that the form required under the said Article is not essential to the validity or enforceability
of the transaction, but merely for convenience.29 The Court agrees with the CA in holding that a
sale of real property, though not consigned in a public instrument or formal writing, is,
nevertheless, valid and binding among the parties, for the time-honored rule is that even a
verbal contract of sale of real estate produces legal effects between the parties.30 Stated
differently, although a conveyance of land is not made in a public document, it does not affect
the validity of such conveyance. Article 1358 does not require the accomplishment of the acts or
contracts in a public instrument in order to validate the act or contract but only to insure its
efficacy.31 Thus, based on the foregoing, the Court finds that the CA did not err in ruling that
the contract of sale between Pedro and Marcos is valid and binding.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 60998 are AFFIRMED.

LEGFORMS ALS3C1415 | 4

3.

TEOCO V. METROPOLITAN BANK AND TRUST COMPANY, G.R. NO. 162333,


23 DECEMBER 2008

REAL creditors are rarely unwilling to receive their debts from any hand which will pay them.1
Ang tunay na may pautang ay bihirang tumanggi sa kabayaran mula kaninuman.
This is a petition for review on certiorari seeking the reversal of the Decision2 of the Court of
Appeals (CA) in CA-G.R. CV No. 58891 dated February 20, 2004 which annulled and set aside
the decision of the Regional Trial Court (RTC) of Catbalogan, Samar on July 22, 1997 in
Cadastral Record No. 1378. The RTC originally dismissed the petition for writ of possession filed
by respondent Metropolitan Bank and Trust Company (Metrobank) on the ground that
intervenors and present petitioners, the brothers Bienvenido Teoco and Juan Teoco, Jr. (the
brothers Teoco), have redeemed the subject property. The CA reversed this dismissal and
ordered the issuance of a writ of possession in favor of respondent Metrobank.

properties. Metrobank refused to accept the amount deposited by the brothers Teoco, alleging
that they are obligated to pay the spouses Cos subsequent obligations to Metrobank as well.
The brothers Teoco claimed that they are not bound to pay all the obligations of the spouses Co,
but only the value of the property sold during the public auction.
On February 26, 1997, the trial court reiterated its earlier order directing Metrobank to effect
summons by publication to the spouses Co. Metrobank complied with said order by submitting
documents showing that it caused the publication of summons against the spouses Co. The
brothers Teoco challenged this summons by publication, arguing that the newspaper where the
summons by publication was published, the Samar Reporter, was not a newspaper of general
circulation in the Philippines. The brothers Teoco furthermore argued that Metrobank did not
present witnesses to identify the documents to prove summons by publication.
RTC Disposition

Culled from the records, the facts are as follows:

On July 22, 1997, the RTC rendered its decision in favor of the brothers Teoco, to wit:

Lydia T. Co, married to Ramon Co, was the registered owner of two parcels of land situated in
Poblacion, Municipality of Catbalogan, Province of Samar under Transfer Certificate of Title
(TCT) Nos. T-6220 and T-6910.3 Ramon Co mortgaged the said parcels of land to Metrobank for
a sum of P200,000.00.

WHEREFORE, judgment is hereby rendered dismissing the petition for a writ of possession
under Section 7 of Act 3135 it appearing that intervenor Atty. Juan C. Teoco, Jr. and his brother
Atty. Bienvenido C. Teoco have legally and effectively redeemed Lot 61 and 67 of Psd-66654,
Catbalogan, Cadastre, from the petitioner Metropolitan Bank and Trust Company.

On February 14, 1991, the properties were sold to Metrobank in an extrajudicial foreclosure sale
under Act No. 3135. One year after the registration of the Certificates of Sale, the titles to the
properties were consolidated in the name of Metrobank for failure of Ramon Co to redeem the
same within the one year period provided for by law. TCT Nos. T-6220 and T-6910 were
cancelled and TCT Nos. T-8482 and T-8493 were issued in the name of Metrobank.

Accordingly, Metrobank may now withdraw the aforesaid redemption money of P356,297.57
deposited by Juan C. Teoco, Jr., on February 10, 1992 with the clerk of court and it is ordered
that the Transfer Certificate of Title Nos. T-8492 and T-8493 of Metropolitan Bank and Trust
Company be and are cancelled and in their place new transfer certificates of title be issued in
favor of Intervenors Attys. Bienvenido C. Teoco and Juan C. Teoco, Jr., of legal age, married, and
residents of Calbiga, Samar, Philippines, upon payment of the prescribed fees therefore. No
pronouncement as to costs.4

On November 29, 1993, Metrobank filed a petition for the issuance of a writ of possession
against Ramon Co and Lydia Co (the spouses Co). However, since the spouses Co were no
longer residing in the Philippines at the time the petition was filed, the trial court ordered
Metrobank, on January 12, 1994 and again on January 26, 1994 to effect summons by publication
against the spouses Co.
On May 17, 1994, the brothers Teoco filed an answer-in-intervention alleging that they are the
successors-in-interest of the spouses Co, and that they had duly and validly redeemed the
subject properties within the reglementary period provided by law. The brothers Teoco thus
prayed for the dismissal of Metrobanks petition for a writ of possession, and for the
nullification of the TCTs issued in the name of Metrobank. The brothers Teoco further prayed
for the issuance in their name of new certificates of title.

According to the RTC, the case filed by Metrobank should be dismissed since intervenor Juan C.
Teoco, Jr., by his tender of P356,297.57 to Metrobank on February 10, 1992, within the
reglementary period of redemption of the foreclosed property, had legally and effectively
redeemed the subject properties from Metrobank. This redemption amount is a fair and
reasonable price and is in keeping with the letter and spirit of Section 78 of the General Banking
Act because Metrobank purchased the mortgaged properties from the sheriff of the same court
for only P316,916.29. In debunking the argument that the amount tendered was insufficient, the
RTC held:

Metrobank, in its reply, alleged that the amount deposited by the brothers Teoco as redemption
price was not sufficient, not being in accordance with Section 78 of the General Banking Act.
Metrobank also said the assignment of the right of redemption by the spouses Co in favor of the
brothers Teoco was not properly executed, as it lacks the necessary authentication from the
Philippine Embassy.

It is contended for Metrobank that the redemption money deposited by Juan C. Teoco, Jr., is
insufficient and ineffective because the spouses Ramon Co and Lydia T. Co owe it the total
amount of P6,856,125 excluding interest and other charges and the mortgage contract executed
by them in favor of Metrobank in 1985 and 1986 (Exh. A and B) are not only security for
payment of their obligation in the amount of P200,000 but also for those obligations that may
have been previously and later extended to the Co couple including interest and other charges
as appears in the accounts, books and records of the bank.

On February 24, 1995, the trial court was informed that the brothers Teoco had deposited the
amount of P356,297.57 to the clerk of court of the RTC in Catbalogan, Samar. The trial court
ordered Metrobank to disclose whether it is allowing the brothers Teoco to redeem the subject

Metrobank cites the case of Mojica v. Court of Appeals, 201 SCRA 517 (1991) where the Supreme
Court held that mortgages given to secure future advancements are valid and legal contracts;
that the amounts named as consideration in said contract do not limit the amount for which the
LEGFORMS ALS3C1415 | 5

mortgage may stand as security; that a mortgage given to secure the advancements is a
continuing security and is not discharged by repayment of the amount named in the mortgage
until the full amount of the advancements are paid. In the opinion of this court, it is not fair and
just to apply this rule to the case at bar. There is no evidence offered by Metrobank that these
other obligations of Ramon Co and his wife were not secured by real estate mortgages of other
lands. If the other indebtedness of the Co couple to Metrobank are secured by a mortgage on
their other lands or properties the obligation can be enforced by foreclosure which the court
assumes Metrobank has already done. There is no proof that Metrobank asked for a deficiency
judgment for these unpaid loans.

On February 20, 2004, the CA decided the appeal in favor of Metrobank, with the following
disposition:

The Supreme Court in the Mojica case was dealing with the rights of the mortgagee under a
mortgage from an owner of the land. It determined the security covered by the mortgage the
intention of the parties and the equities of the case. What was held in that case was hedged
about so as to limit the decision to the particular facts. It must be apparent that the Mojica ruling
cannot be construed to give countenance or approval to the theory that in all cases without
exception mortgages given to secure past and future advancements are valid and legal contracts.

SO ORDERED.7

In construing a contract between the bank and a borrower such a construction as would be more
favorable to the borrower should be adopted since the alleged past and future indebtedness of
Ramon Co to the bank was not described and specified therein and that the addendum was
made because the mortgage given therefore were not sufficient or that these past and future
advancements were unsecured. That being the case the mortgage contracts, Exh. A and B should
be interpreted against Metrobank which drew said contracts. A written contract should, in case
of doubt, be interpreted against the party who has drawn the contract (6 R.C.L. 854; H.E.
Heackock Co. vs. Macondray & Co., 42 Phil. 205). Here, the mortgage contracts are in printed
form prepared by Metrobank and therefore ambiguities therein should be construed against the
party causing it (Yatco vs. El Hogar Filipino, 67 Phil. 610; Hodges vs. Tazaro, CA, 57 O.G.
6970).5
The RTC added that there is another reason for dismissing Metrobanks petition: the RTC failed
to acquire jurisdiction over the spouses Co. The RTC noted that Metrobank published its
petition for writ of possession, but did not publish the writ of summons issued by said court on
February 16, 1994. According to the RTC:

WHEREFORE, the appeal is hereby GRANTED. The assailed Decision dated July 22, 1997
rendered by the Regional Trial Court of Catbalogan, Samar Branch 29 in Cadastral Record No.
1378 is hereby ANNULLED and SET ASIDE. Accordingly, let a writ of possession in favor of
petitioner-appellant METROPOLITAN BANK AND TRUST COMPANY be issued over the
properties and improvements covered by Transfer Certificates of Title Nos. T-8492 and T-8493 of
the Registry of Deeds of Western Samar.

As regards the question of jurisdiction, the CA ruled that since the parcels of land in question
were already registered in the name of Metrobank at the time the petition was filed, and since
the certificates of title of the spouses Co were already cancelled, there is no more need to issue
summons to the spouses Co. The CA noted that the best proof of ownership of the parcel of land
is a certificate of title.8
The CA also held that the issue of the validity of summons to the spouses Co is unimportant
considering that the properties in question were mortgaged to Metrobank and were
subsequently sold to the same bank after the spouses Co failed to satisfy the principal
obligation. Hence, the applicable law is Act No. 3135,9 as amended by Act No. 4118. Section 7 of
said Act No. 3135 states that a petition for the issuance of a writ of possession filed by the
purchaser of a property in an extrajudicial foreclosure sale may be done ex parte. It is the
ministerial duty of the trial court to grant such writ of possession. No discretion is left to the trial
court. Any question regarding the cancellation of the writ, or with respect to the validity and
regularity of the public sale should be determined in a subsequent proceeding as outlined in
Section 9 of Act No. 3135.10
Further, the CA held that the brothers Teoco were not able to effectively redeem the subject
properties, because the amount tendered was insufficient, and the brothers Teoco have not
sufficiently shown that the spouses Cos right of redemption was properly transferred to them.
Issues

A petition for a writ of possession of foreclosed property is in reality a possession suit. That
Metrobank prayed for a writ of possession in an independent special proceeding does not alter
the nature of the case as a possessory suit (Cabrera v. Sinoy, L.-12648, 23 November 1959).

In this Rule 45 petition, the brothers Teoco impute to the CA the following errors:
I

The defendant or owner of the property foreclosed by the petitioner should be summoned to
answer the petition. Accordingly, the publication made by the petitioner is fatally flawed and
defective and on that basis alone this court acquired no jurisdiction over the person of
respondents Ramon Co and his wife (Mapa vs. Court of Appeals, G.R. No. 79394, October 2,
1992; Lopez vs. Philippine National Bank, L-34223, December 10, 1982).6
Metrobank appealed to the CA. In its appeal, Metrobank claimed that the RTC erred in finding
that the publication made by it is fatally flawed, and that the brothers Teoco had effectively
redeemed the properties in question.
CA Disposition

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF JUDGMENT IN


HOLDING THAT PETITIONERS FAILED TO REDEEM THE SUBJECT PROPERTIES WITHIN
THE REGLEMENTARY PERIOD OF ONE YEAR AND THAT THE REDEMPTION PRICE
TENDERED IS INSUFFICIENT.
II
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF JUDGMENT IN
HOLDING PETITIONERS TO PAY NOT ONLY THE P200,000 PRINCIPAL OBLIGATION BUT
ALSO THAT PREVIOUSLY EXTENDED, WHETHER DIRECT OR INDIRECT, PRINCIPAL OR
SECONDARY AS APPEARS IN THE ACCOUNTS, BOOKS AND RECORDS.
LEGFORMS ALS3C1415 | 6

III

Further, Article 2129 of the Civil Code provides:

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONERS


HAVE NOT SUFFICIENTLY SHOW(N) THAT THE RIGHT OF REDEMPTION WAS
PROPERLY TRANSFERRED TO THEM.

Art. 2129. The creditor may claim from a third person in possession of the mortgaged property,
the payment of the part of the credit secured by the property which said third person possesses,
in the terms and with the formalities which the law establishes.

IV

The mortgage directly and immediately subjects the property upon which it is imposed,
whoever the possessor may be to the fulfillment of the obligation for whose security it was
constituted. Otherwise stated, a mortgage creates a real right which is enforceable against the
whole world. Hence, even if the mortgage property is sold or its possession transferred to
another, the property remains subject to the fulfillment of the obligation for whose security it
was constituted.14

THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE


REGIONAL TRIAL COURT, BRANCH 29, AND GRANTING THE WRIT OF POSSESSION TO
THE RESPONDENT.11 (Underscoring supplied)
Our Ruling
Sufficiency of Amount Tendered
We find that neither petitioners, the brothers Teoco, nor respondent, Metrobank, were able to
present sufficient evidence to prove whether the additional loans granted to the spouses Co by
Metrobank were covered by the mortgage agreement between them. The brothers Teoco failed
to present any evidence of the supposed trust receipt agreement between Metrobank and the
spouses Co, or an evidence of the supposed payment by the spouses Co of the other loans
extended by Metrobank. Metrobank, on the other hand, merely relied on the stipulation on the
mortgage deed that the mortgage was intended to secure "the payment of the same (P200,000.00
loan) and those that may hereafter be obtained."12 However, there was no mention whatsoever
of the mortgage agreement in the succeeding loans entered into by the spouses Co.
While we agree with Metrobank that mortgages intended to secure future advancements are
valid and legal contracts,13 entering into such mortgage contracts does not necessarily put
within its coverage all loan agreements that may be subsequently entered into by the parties. If
Metrobank wishes to apply the mortgage contract in order to satisfy loan obligations not stated
on the face of such contract, Metrobank should prove by a preponderance of evidence that such
subsequent obligations are secured by said mortgage contract and not by any other form of
security.
In order to prevent any injustice to, or unjust enrichment of, any of the parties, this Court holds
that the fairest resolution is to allow the brothers Teoco to redeem the foreclosed properties
based on the amount for which it was foreclosed (P255,441.14 plus interest). This is subject,
however, to the right of Metrobank to foreclose the same property anew in order to satisfy the
succeeding loans entered into by the spouses Co, if they were, indeed, covered by the mortgage
contract. The right of Metrobank to foreclose the mortgage would not be hampered by the
transfer of the properties to the brothers Teoco as a result of this decision, since Article 2127 of
the Civil Code provides:
Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits,
and the rents or income not yet received when the obligation becomes due, and to the amount of
the indemnity granted or owing to the proprietor from the insurers of the property mortgaged,
or in virtue of expropriation for public use, with the declarations, amplifications and limitations
established by law, whether the estate remains in the possession of the mortgagor, or it passes
into the hands of a third person. (Emphasis supplied)

Thus, the redemption by the brothers Teoco shall be without prejudice to the subsequent
foreclosure of same properties by Metrobank in order to satisfy other obligations covered by the
Real Estate Mortgage.
Transfer of Right of Redemption
The CA held that the brothers Teoco have not sufficiently shown that the spouses Cos right of
redemption was properly transferred to them. The assignment of the right of redemption only
stated that the spouses Co are transferring the right of redemption to their parents, brothers, and
sisters, but did not specifically include the brothers Teoco, who are just brothers-in-law of
Ramon Co. Furthermore, the spouses Co no longer reside in the Philippines, and the assignment
of the right of redemption was not properly executed and/or authenticated.
The alleged transfer of the right of redemption is couched in the following language:
KNOW ALL MEN BY THESE PRESENTS:
That we, RAMON CO and LYDIA CO, of legal ages, for and in consideration of preserving the
continuous ownership and possession of family owned properties, by these presents, hereby
cede, transfer and convey in favor of my parents, brothers and sisters, the right to redeem the
properties under TCT Nos. T-6910 and T-6220, located in Patag district, Catbalogan, Samar, sold
by public auction sale on February 14, 1991 to the Metropolitan Bank and Trust Company.
Furthermore, we waived whatever rights we may have over the properties in favor of the
successor-in-interest including that of transferring the title to whoever may redeem the aforesaid
properties.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this 10th day of January,
1992 at Vancouver, Canada.15
The brothers Teoco may be brothers-in-law only of Ramon Co, but they are also the brothers of
Lydia Teoco Co, who is actually the registered owner of the properties covered by TCT Nos. T6910 and T-6220. Clearly, the brothers Teoco are two of the persons referred to in the above
transfer of the right of redemption executed by the spouses Co.
Anent the CA observation that the assignment of the right of redemption was not properly
executed and/or authenticated, Lopez v. Court of Appeals16 is instructive. In Lopez, this Court
LEGFORMS ALS3C1415 | 7

ruled that a special power of attorney executed in a foreign country is generally not admissible
in evidence as a public document in our courts. The Court there held:
Is the special power of attorney relied upon by Mrs. Ty a public document? We find that it is. It
has been notarized by a notary public or by a competent public official with all the solemnities
required by law of a public document. When executed and acknowledged in the Philippines,
such a public document or a certified true copy thereof is admissible in evidence. Its due
execution and authentication need not be proven unlike a private writing.
Section 25, Rule 132 of the Rules of Court provides
Sec. 25. Proof of public or official record. An official record or an entry therein, when
admissible for any purpose, may be evidenced by an official publication thereof or by a copy
attested by the officer having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate that such officer has
the custody. If the office in which the record is kept is in a foreign country, the certificate may be
made by a secretary of embassy or legation consul general, consul, vice consul, or consular agent
or by any officer in the foreign service of the Philippines stationed in the foreign country in
which the record is kept, and authenticated by the seal of his office.
From the foregoing provision, when the special power of attorney is executed and
acknowledged before a notary public or other competent official in a foreign country, it cannot
be admitted in evidence unless it is certified as such in accordance with the foregoing provision
of the rules by a secretary of embassy or legation, consul general, consul, vice consul, or consular
agent or by any officer in the foreign service of the Philippines stationed in the foreign country
in which the record is kept of said public document and authenticated by the seal of his office. A
city judge-notary who notarized the document, as in this case, cannot issue such certification.17
Verily, the assignment of right of redemption is not admissible in evidence as a public document
in our courts. However, this does not necessarily mean that such document has no probative
value.
There are generally three reasons for the necessity of the presentation of public documents. First,
public documents are prima facie evidence of the facts stated in them, as provided for in Section
23, Rule 132 of the Rules of Court:
SEC. 23. Public documents as evidence. Documents consisting of entries in public records
made in the performance of a duty by a public officer are prima facie evidence of the facts
therein stated. All other public documents are evidence, even against a third person, of the fact
which gave rise to their execution and of the date of the latter. (Underscoring supplied)
Second, the presentation of a public document dispenses with the need to prove a documents
due execution and authenticity, which is required under Section 20, Rule 132 of the Rules of
Court for the admissibility of private documents offered as authentic:
SEC. 20. Proof of private document. Before any private document offered as authentic is
received in evidence, its due execution and authenticity must be proved either:
(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.


Any other private document need only be identified as that which it is claimed to be.
(Underscoring supplied)
In the presentation of public documents as evidence, on the other hand, due execution and
authenticity are already presumed:
SEC. 23. Public documents are evidence. Documents consisting of entries in public records
made in the performance of a duty by a public officer are prima facie evidence of the facts
therein stated. All other public documents are evidence, even against a third person, of the fact
which gave rise to their execution and of the date of the latter. (Underscoring supplied)
SEC. 30. Proof of notarial documents. Every instrument duly acknowledged or proved and
certified as provided by law, may be presented in evidence without further proof, the certificate
of acknowledgment being prima facie evidence of the execution of the instrument or document
involved. (Underscoring supplied)
Third, the law may require that certain transactions appear in public instruments, such as
Articles 1358 and 1625 of the Civil Code, which respectively provide:
Art. 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property; sales of real property or of an interest
therein governed by Articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal
partnership of gains;
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in
writing, even a private one. But sales of goods, chattels or things in action are governed by
Articles 1403, No. 2, and 1405.
Art. 1625. An assignment of a credit, right or action shall produce no effect as against third
person, unless it appears in a public instrument, or the instrument is recorded in the Registry of
Property in case the assignment involves real property. (Underscoring supplied)
Would the exercise by the brothers Teoco of the right to redeem the properties in question be
precluded by the fact that the assignment of right of redemption was not contained in a public
document? We rule in the negative.
Metrobank never challenged either the content, the due execution, or the genuineness of the
assignment of the right of redemption. Consequently, Metrobank is deemed to have admitted
the same. Having impliedly admitted the content of the assignment of the right of redemption,
LEGFORMS ALS3C1415 | 8

there is no necessity for a prima facie evidence of the facts there stated. In the same manner,
since Metrobank has impliedly admitted the due execution and genuineness of the assignment
of the right of redemption, a private document evidencing the same is admissible in evidence.18
True it is that the Civil Code requires certain transactions to appear in public documents.
However, the necessity of a public document for contracts which transmit or extinguish real
rights over immovable property, as mandated by Article 1358 of the Civil Code, is only for
convenience; it is not essential for validity or enforceability.19 Thus, in Cenido v. Apacionado,20
this Court ruled that the only effect of noncompliance with the provisions of Article 1358 of the
Civil Code is that a party to such a contract embodied in a private document may be compelled
to execute a public document:
Article 1358 does not require the accomplishment of the acts or contracts in a public instrument
in order to validate the act or contract but only to insure its efficacy, so that after the existence of
said contract has been admitted, the party bound may be compelled to execute the proper
document. This is clear from Article 1357, viz.:
"Art. 1357. If the law requires a document or other special form, as in the acts and contracts
enumerated in the following article (Article 1358), the contracting parties may compel each other
to observe that form, once the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract."21
On the other hand, Article 1625 of the Civil Code provides that "[a]n assignment of a credit,
right or action shall produce no effect as against third person, unless it appears in a public
instrument, or the instrument is recorded in the Registry of Property in case the assignment
involves real property."
In Co v. Philippine National Bank,22 the Court interpreted the phrase "effect as against a third
person" to be damage or prejudice to such third person, thus:
x x x In Lichauco vs. Olegario, et al., 43 Phil. 540, this Court held that "whether or not x x x an
execution debtor was legally authorized to sell his right of redemption, is a question already
decided by this Court in the affirmative in numerous decisions on the precepts of Sections 463
and 464 and other sections related thereto, of the Code of Civil Procedure." (The mentioned
provisions are carried over in Rule 39 of the Revised Rules of Court.) That the transfers or
conveyances in question were not registered is of miniscule significance, there being no showing
that PNB was damaged or could be damaged by such omission. When CITADEL made its
tender on May 5, 1976, PNB did not question the personality of CITADEL at all. It is now too
late and purely technical to raise such innocuous failure to comply with Article 1625 of the Civil
Code.23

3rd persons," i.e., "a 3rd person with a right against original creditor, for example, an original
creditor of creditor, against whom surely such an assignment by his debtor (creditor in the
credit assigned) would be prejudicial, because he, creditor of assigning creditor, would thus be
deprived of an attachable asset of his debtor x x x;
xxxx
Except for the question of the claimed lack of authority on the part of TFCs president to execute
the assignment of credit in favor of PCIB improperly raised for the first time on appeal, as
observed by the Court of Appeals the issues raised by Ansaldo were set up by him in, and
after analysis and assessment rejected by, both the Trial Court and the Appellate Tribunal. This
court sees no error whatever in the appreciation of the facts by either Court or their application
of the relevant law and jurisprudence to those facts, inclusive of the question posed anew by
Ansaldo relative to the alleged absence of authority on the part of TFCs president to assign the
corporations credit to PCIB.25
In the case at bar, Metrobank would not be prejudiced by the assignment by the spouses Co of
their right of redemption in favor of the brothers Teoco. As conceded by Metrobank, the
assignees, the brothers Teoco, would merely step into the shoes of the assignors, the spouses Co.
The brothers Teoco would have to comply with all the requirements imposed by law on the
spouses Co. Metrobank would not lose any security for the satisfaction of any loan obtained
from it by the spouses Co. In fact, the assignment would even prove to be beneficial to
Metrobank, as it can foreclose on the subject properties anew, provided it proves that the
subsequent loans entered into by the spouses Co are covered by the mortgage contract.
WHEREFORE, the decision of the Court of Appeals is SET ASIDE. The decision of the Regional
Trial Court in Catbalogan, Samar is REINSTATED with the following MODIFICATION: the
redemption by Bienvenido C. Teoco and Juan C. Teoco, Jr. of the properties covered by TCT
Nos. T-6910 and T-6220 shall be without prejudice to the subsequent foreclosure of same
properties by Metropolitan Bank and Trust Company to satisfy other loans covered by the Real
Estate Mortgage.

In Ansaldo v. Court of Appeals,24 the Court held:


In its Decision, the First Division of the Appellate Tribunal, speaking through the Presiding
Justice at the time, Hon. Magno S. Gatmaitan, held as regards Arnaldos contentions, that
xxxx
2) there was no need that the assignment be in a public document this being required only "to
produce x x x effect as against third persons" (Article 1625, Civil Code), i.e., "to adversely affect
LEGFORMS ALS3C1415 | 9

EXCEPTIONS: THE LAW REQUIRES NOTARIZATION AS A REQUISITE FOR VALIDITY.


DONATION OF IMMOVABLE PROPERTY
1.

CIVIL CODE, ARTICLE 749

Art. 749. In order that the donation of an immovable may be valid, it must be made in a public
document, specifying therein the property donated and the value of the charges which the
donee must satisfy.

2.

UNCHUAN V. LOZADA, G.R. NO. 172671, 16 APRIL 2009

For review are the Decision1 dated February 23, 2006 and Resolution2 dated April 12, 2006 of
the Court of Appeals in CA-G.R. CV. No. 73829. The appellate court had affirmed with
modification the Order3 of the Regional Trial Court (RTC) of Cebu City, Branch 10 reinstating its
Decision4 dated June 9, 1997.
The facts of the case are as follows:
Sisters Anita Lozada Slaughter and Peregrina Lozada Saribay were the registered co-owners of
Lot Nos. 898-A-3 and 898-A-4 covered by Transfer Certificates of Title (TCT) Nos. 532585 and
532576 in Cebu City.
The sisters, who were based in the United States, sold the lots to their nephew Antonio J.P.
Lozada (Antonio) under a Deed of Sale7 dated March 11, 1994. Armed with a Special Power of
Attorney8 from Anita, Peregrina went to the house of their brother, Dr. Antonio Lozada (Dr.
Lozada), located at 4356 Faculty Avenue, Long Beach California.9 Dr. Lozada agreed to advance
the purchase price of US$367,000 or P10,000,000 for Antonio, his nephew. The Deed of Sale was
later notarized and authenticated at the Philippine Consuls Office. Dr. Lozada then forwarded
the deed, special power of attorney, and owners copies of the titles to Antonio in the
Philippines. Upon receipt of said documents, the latter recorded the sale with the Register of
Deeds of Cebu. Accordingly, TCT Nos. 12832210 and 12832311 were issued in the name of
Antonio Lozada.
Pending registration of the deed, petitioner Marissa R. Unchuan caused the annotation of an
adverse claim on the lots. Marissa claimed that Anita donated an undivided share in the lots to
her under an unregistered Deed of Donation12 dated February 4, 1987.

Antonio are to have 40% and 60% stake, respectively. Meanwhile, Lourdes G. Vicencio, a
witness for respondents confirmed that she had been renting the ground floor of Anitas house
since 1983, and tendering rentals to Antonio.
For her part, Marissa testified that she accompanied Anita to the office of Atty. Cresencio
Tomakin for the signing of the Deed of Donation. She allegedly kept it in a safety deposit box
but continued to funnel monthly rentals to Peregrinas account.
A witness for petitioner, one Dr. Cecilia Fuentes, testified on Peregrinas medical records.
According to her interpretation of said records, it was physically impossible for Peregrina to
have signed the Deed of Sale on March 11, 1994, when she was reported to be suffering from
edema. Peregrina died on April 4, 1994.
In a Decision dated June 9, 1997, RTC Judge Leonardo B. Caares disposed of the consolidated
cases as follows:
WHEREFORE, judgment is hereby rendered in Civil Case No. CEB-16145, to wit:
1. Plaintiff Antonio J.P. Lozada is declared the absolute owner of the properties in question;
2. The Deed of Donation (Exh. "9") is declared null and void, and Defendant Marissa R. Unchuan
is directed to surrender the original thereof to the Court for cancellation;
3. The Register of Deeds of Cebu City is ordered to cancel the annotations of the Affidavit of
Adverse Claim of defendant Marissa R. Unchuan on TCT Nos. 53257 and 53258 and on such all
other certificates of title issued in lieu of the aforementioned certificates of title;
4. Defendant Marissa R. Unchuan is ordered to pay Antonio J.P. Lozada and Anita Lozada
Slaughter the sum of P100,000.00 as moral damages; exemplary damages of P50,000.00;
P50,000.00 for litigation expenses and attorneys fees of P50,000.00; and
5. The counterclaims of defendant Marissa R. Unchuan [are] DISMISSED.
In Civil Case No. CEB-16159, the complaint is hereby DISMISSED.
In both cases, Marissa R. Unchuan is ordered to pay the costs of suit.
SO ORDERED.13

Antonio and Anita brought a case against Marissa for quieting of title with application for
preliminary injunction and restraining order. Marissa for her part, filed an action to declare the
Deed of Sale void and to cancel TCT Nos. 128322 and 128323. On motion, the cases were
consolidated and tried jointly.

On motion for reconsideration by petitioner, the RTC of Cebu City, Branch 10, with Hon. Jesus
S. dela Pea as Acting Judge, issued an Order14 dated April 5, 1999. Said order declared the
Deed of Sale void, ordered the cancellation of the new TCTs in Antonios name, and directed
Antonio to pay Marissa P200,000 as moral damages, P100,000 as exemplary damages, P100,000
attorneys fees and P50,000 for expenses of litigation. The trial court also declared the Deed of
Donation in favor of Marissa valid. The RTC gave credence to the medical records of Peregrina.

At the trial, respondents presented a notarized and duly authenticated sworn statement, and a
videotape where Anita denied having donated land in favor of Marissa. Dr. Lozada testified that
he agreed to advance payment for Antonio in preparation for their plan to form a corporation.
The lots are to be eventually infused in the capitalization of Damasa Corporation, where he and

Respondents moved for reconsideration. On July 6, 2000, now with Hon. Soliver C. Peras, as
Presiding Judge, the RTC of Cebu City, Branch 10, reinstated the Decision dated June 9, 1997,
but with the modification that the award of damages, litigation expenses and attorneys fees
were disallowed.
LEGFORMS ALS3C1415 | 10

Petitioner appealed to the Court of Appeals. On February 23, 2006 the appellate court affirmed
with modification the July 6, 2000 Order of the RTC. It, however, restored the award of P50,000
attorneys fees and P50,000 litigation expenses to respondents.

45 of the Rules. In addition, they aver that Peregrinas unauthenticated medical records were
merely falsified to make it appear that she was confined in the hospital on the day of the sale.
Further, respondents question the credibility of Dr. Fuentes who was neither presented in court
as an expert witness18 nor professionally involved in Peregrinas medical care.

Thus, the instant petition which raises the following issues:


I.
WHETHER THE COURT OF APPEALS ERRED AND VIOLATED PETITIONERS RIGHT TO
DUE PROCESS WHEN IT FAILED TO RESOLVE PETITIONERS THIRD ASSIGNED ERROR.
II.
WHETHER THE HONORABLE SUPREME COURT MAY AND SHOULD REVIEW THE
CONFLICTING FACTUAL FINDINGS OF THE HONORABLE REGIONAL TRIAL COURT IN
ITS OWN DECISION AND RESOLUTIONS ON THE MOTIONS FOR RECONSIDERATION,
AND THAT OF THE HONORABLE COURT OF APPEALS.
III.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONERS CASE IS BARRED BY LACHES.
IV.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
DEED OF DONATION EXECUTED IN FAVOR OF PETITIONER IS VOID.
V.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT
ANITA LOZADAS VIDEOTAPED STATEMENT IS HEARSAY.15
Simply stated, the issues in this appeal are: (1) Whether the Court of Appeals erred in upholding
the Decision of the RTC which declared Antonio J.P. Lozada the absolute owner of the
questioned properties; (2) Whether the Court of Appeals violated petitioners right to due
process; and (3) Whether petitioners case is barred by laches.
Petitioner contends that the appellate court violated her right to due process when it did not rule
on the validity of the sale between the sisters Lozada and their nephew, Antonio. Marissa finds
it anomalous that Dr. Lozada, an American citizen, had paid the lots for Antonio. Thus, she
accuses the latter of being a mere dummy of the former. Petitioner begs the Court to review the
conflicting factual findings of the trial and appellate courts on Peregrinas medical condition on
March 11, 1994 and Dr. Lozadas financial capacity to advance payment for Antonio. Likewise,
petitioner assails the ruling of the Court of Appeals which nullified the donation in her favor
and declared her case barred by laches. Petitioner finally challenges the admissibility of the
videotaped statement of Anita who was not presented as a witness.
On their part, respondents pray for the dismissal of the petition for petitioners failure to furnish
the Register of Deeds of Cebu City with a copy thereof in violation of Sections 316 and 4,17 Rule

Further, respondents impugn the validity of the Deed of Donation in favor of Marissa. They
assert that the Court of Appeals did not violate petitioners right to due process inasmuch as it
resolved collectively all the factual and legal issues on the validity of the sale.
Faithful adherence to Section 14,19 Article VIII of the 1987 Constitution is indisputably a
paramount component of due process and fair play. The parties to a litigation should be
informed of how it was decided, with an explanation of the factual and legal reasons that led to
the conclusions of the court.20
In the assailed Decision, the Court of Appeals reiterates the rule that a notarized and
authenticated deed of sale enjoys the presumption of regularity, and is admissible without
further proof of due execution. On the basis thereof, it declared Antonio a buyer in good faith
and for value, despite petitioners contention that the sale violates public policy. While it is a
part of the right of appellant to urge that the decision should directly meet the issues presented
for resolution,21 mere failure by the appellate court to specify in its decision all contentious
issues raised by the appellant and the reasons for refusing to believe appellants contentions is
not sufficient to hold the appellate courts decision contrary to the requirements of the law22
and the Constitution.23 So long as the decision of the Court of Appeals contains the necessary
findings of facts to warrant its conclusions, we cannot declare said court in error if it withheld
"any specific findings of fact with respect to the evidence for the defense."24 We will abide by
the legal presumption that official duty has been regularly performed,25 and all matters within
an issue in a case were laid down before the court and were passed upon by it.26
In this case, we find nothing to show that the sale between the sisters Lozada and their nephew
Antonio violated the public policy prohibiting aliens from owning lands in the Philippines. Even
as Dr. Lozada advanced the money for the payment of Antonios share, at no point were the lots
registered in Dr. Lozadas name. Nor was it contemplated that the lots be under his control for
they are actually to be included as capital of Damasa Corporation. According to their agreement,
Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation, respectively.
Under Republic Act No. 7042,27 particularly Section 3,28 a corporation organized under the
laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote
is owned and held by citizens of the Philippines, is considered a Philippine National. As such,
the corporation may acquire disposable lands in the Philippines. Neither did petitioner present
proof to belie Antonios capacity to pay for the lots subjects of this case.
Petitioner, likewise, calls on the Court to ascertain Peregrinas physical ability to execute the
Deed of Sale on March 11, 1994. This essentially necessitates a calibration of facts, which is not
the function of this Court.29 Nevertheless, we have sifted through the Decisions of the RTC and
the Court of Appeals but found no reason to overturn their factual findings. Both the trial court
and appellate court noted the lack of substantial evidence to establish total impossibility for
Peregrina to execute the Deed of Sale.
In support of its contentions, petitioner submits a copy of Peregrinas medical records to show
that she was confined at the Martin Luther Hospital from February 27, 1994 until she died on
April 4, 1994. However, a Certification30 from Randy E. Rice, Manager for the Health
LEGFORMS ALS3C1415 | 11

Information Management of the hospital undermines the authenticity of said medical records. In
the certification, Rice denied having certified or having mailed copies of Peregrinas medical
records to the Philippines. As a rule, a document to be admissible in evidence, should be
previously authenticated, that is, its due execution or genuineness should be first shown.31
Accordingly, the unauthenticated medical records were excluded from the evidence. Even
assuming that Peregrina was confined in the cited hospital, the Deed of Sale was executed on
March 11, 1994, a month before Peregrina reportedly succumbed to Hepato Renal Failure caused
by Septicemia due to Myflodysplastic Syndrome.32 Nothing in the records appears to show that
Peregrina was so incapacitated as to prevent her from executing the Deed of Sale. Quite the
contrary, the records reveal that close to the date of the sale, specifically on March 9, 1994,
Peregrina was even able to issue checks33 to pay for her attorneys professional fees and her
own hospital bills. At no point in the course of the trial did petitioner dispute this revelation.
Now, as to the validity of the donation, the provision of Article 749 of the Civil Code is in point:
art. 749. In order that the donation of an immovable may be valid, it must be made in a public
document, specifying therein the property donated and the value of the charges which the
donee must satisfy.
The acceptance may be made in the same deed of donation or in a separate public document,
but it shall not take effect unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall be notified thereof in an
authentic form, and this step shall be noted in both instruments.
When the law requires that a contract be in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain way, that requirement is absolute and
indispensable.34 Here, the Deed of Donation does not appear to be duly notarized. In page three
of the deed, the stamped name of Cresencio Tomakin appears above the words Notary Public
until December 31, 1983 but below it were the typewritten words Notary Public until December
31, 1987. A closer examination of the document further reveals that the number 7 in 1987 and
Series of 1987 were merely superimposed.35 This was confirmed by petitioners nephew Richard
Unchuan who testified that he saw petitioners husband write 7 over 1983 to make it appear that
the deed was notarized in 1987. Moreover, a Certification36 from Clerk of Court Jeoffrey S.
Joaquino of the Notarial Records Division disclosed that the Deed of Donation purportedly
identified in Book No. 4, Document No. 48, and Page No. 35 Series of 1987 was not reported and
filed with said office. Pertinent to this, the Rules require a party producing a document as
genuine which has been altered and appears to have been altered after its execution, in a part
material to the question in dispute, to account for the alteration. He may show that the alteration
was made by another, without his concurrence, or was made with the consent of the parties
affected by it, or was otherwise properly or innocently made, or that the alteration did not
change the meaning or language of the instrument. If he fails to do that, the document shall, as
in this case, not be admissible in evidence.371avvphi1
Remarkably, the lands described in the Deed of Donation are covered by TCT Nos. 7364538 and
73646,39 both of which had been previously cancelled by an Order40 dated April 8, 1981 in LRC
Record No. 5988. We find it equally puzzling that on August 10, 1987, or six months after Anita
supposedly donated her undivided share in the lots to petitioner, the Unchuan Development
Corporation, which was represented by petitioners husband, filed suit to compel the Lozada
sisters to surrender their titles by virtue of a sale. The sum of all the circumstances in this case

calls for no other conclusion than that the Deed of Donation allegedly in favor of petitioner is
void. Having said that, we deem it unnecessary to rule on the issue of laches as the execution of
the deed created no right from which to reckon delay in making any claim of rights under the
instrument.
Finally, we note that petitioner faults the appellate court for not excluding the videotaped
statement of Anita as hearsay evidence. Evidence is hearsay when its probative force depends,
in whole or in part, on the competency and credibility of some persons other than the witness by
whom it is sought to be produced. There are three reasons for excluding hearsay evidence: (1)
absence of cross-examination; (2) absence of demeanor evidence; and (3) absence of oath.41 It is
a hornbook doctrine that an affidavit is merely hearsay evidence where its maker did not take
the witness stand.42 Verily, the sworn statement of Anita was of this kind because she did not
appear in court to affirm her averments therein. Yet, a more circumspect examination of our
rules of exclusion will show that they do not cover admissions of a party;43 the videotaped
statement of Anita appears to belong to this class. Section 26 of Rule 130 provides that "the act,
declaration or omission of a party as to a relevant fact may be given in evidence against him. It
has long been settled that these admissions are admissible even if they are hearsay.44 Indeed,
there is a vital distinction between admissions against interest and declaration against interest.
Admissions against interest are those made by a party to a litigation or by one in privity with or
identified in legal interest with such party, and are admissible whether or not the declarant is
available as a witness. Declaration against interest are those made by a person who is neither a
party nor in privity with a party to the suit, are secondary evidence and constitute an exception
to the hearsay rule. They are admissible only when the declarant is unavailable as a witness.45
Thus, a mans acts, conduct, and declaration, wherever made, if voluntary, are admissible
against him, for the reason that it is fair to presume that they correspond with the truth, and it is
his fault if they do not.46 However, as a further qualification, object evidence, such as the
videotape in this case, must be authenticated by a special testimony showing that it was a
faithful reproduction.47 Lacking this, we are constrained to exclude as evidence the videotaped
statement of Anita. Even so, this does not detract from our conclusion concerning petitioners
failure to prove, by preponderant evidence, any right to the lands subject of this case.
Anent the award of moral damages in favor of respondents, we find no factual and legal basis
therefor. Moral damages cannot be awarded in the absence of a wrongful act or omission or
fraud or bad faith. When the action is filed in good faith there should be no penalty on the right
to litigate. One may have erred, but error alone is not a ground for moral damages.48 The award
of moral damages must be solidly anchored on a definite showing that respondents actually
experienced emotional and mental sufferings. Mere allegations do not suffice; they must be
substantiated by clear and convincing proof.49 As exemplary damages can be awarded only
after the claimant has shown entitlement to moral damages,50 neither can it be granted in this
case.
WHEREFORE, the instant petition is DENIED. The Decision dated February 23, 2006, and
Resolution dated April 12, 2006 of the Court of Appeals in CA-G.R. CV. No. 73829 are
AFFIRMED with MODIFICATION. The awards of moral damages and exemplary damages in
favor of respondents are deleted. No pronouncement as to costs.

LEGFORMS ALS3C1415 | 12

3.

ARANGOTE V. MAGLUNOB, G.R. NO. 178906, 18 FEBRUARY 2009

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules
of Civil Procedure seeking to reverse and set aside the Decision1 dated 27 October 2006 and
Resolution2 dated 29 June 2007 of the Court of Appeals in CA-G.R. SP No. 64970. In its assailed
Decision, the appellate court affirmed the Decision3 dated 12 September 2000 of the Regional
Trial Court (RTC), 6th Judicial Region, Branch 1, Kalibo, Aklan, in Civil Case No. 5511, which
reversed the Decision4 dated 6 April 1998 of the 7th Municipal Circuit Trial Court (MCTC) of
Ibajay-Nabas, Ibajay, Aklan, in Civil Case No. 156; and declared5 the herein respondent-Spouses
Martin and Lourdes Maglunob (Spouses Maglunob) and respondent Romeo Salido (Romeo) as
the lawful owners and possessors of Lot 12897 with an area of 982 square meters, more or less,
located in Maloco, Ibajay, Aklan (subject property). In its assailed Resolution, the appellate court
denied herein petitioner Elvira T. Arangotes Motion for Reconsideration.
Elvira T. Arangote, herein petitioner married to Ray Mars E. Arangote, is the registered owner of
the subject property, as evidenced by Original Certificate of Title (OCT) No. CLOA-1748.6
Respondents Martin (Martin II) and Romeo are first cousins and the grandnephews of
Esperanza Maglunob-Dailisan (Esperanza), from whom petitioner acquired the subject property.
The Petition stems from a Complaint7 filed by petitioner and her husband against the
respondents for Quieting of Title, Declaration of Ownership and Possession, Damages with
Preliminary Injunction, and Issuance of Temporary Restraining Order before the MCTC,
docketed as Civil Case No. 156.
The Complaint alleged that Esperanza inherited the subject property from her uncle Victorino
Sorrosa by virtue of a notarized Partition Agreement8 dated 29 April 1985, executed by the
latters heirs. Thereafter, Esperanza declared the subject property in her name for real property
tax purposes, as evidenced by Tax Declaration No. 16218 (1985).9
The Complaint further stated that on 24 June 1985, Esperanza executed a Last Will and
Testament10 bequeathing the subject property to petitioner and her husband, but it was never
probated. On 9 June 1986, Esperanza executed another document, an Affidavit,11 in which she
renounced, relinquished, waived and quitclaimed all her rights, share, interest and participation
whatsoever in the subject property in favor of petitioner and her husband. On the basis thereof,
Tax Declaration No. 16218 in the name of Esperanza was cancelled and Tax Declaration No.
1666612 (1987) was issued in the name of the petitioner and her husband.
In 1989, petitioner and her husband constructed a house on the subject property. On 26 March
1993, OCT No. CLOA-1748 was issued by the Secretary of the Department of Agrarian Reform
(DAR) in the name of petitioner, married to Ray Mars E. Arangote. However, respondents,
together with some hired persons, entered the subject property on 3 June 1994 and built a
hollow block wall behind and in front of petitioners house, which effectively blocked the
entrance to its main door.

When Tomas and Inocencia passed away, their shares passed on by inheritance to respondents
Martin II and Romeo, respectively. Hence, the subject property was co-owned by Esperanza,
respondent Martin II (together with his wife Lourdes), and respondent Romeo, each holding a
one-third pro-indiviso share therein. Thus, Esperanza could not validly waive her rights and
interest over the entire subject property in favor of the petitioner.
Respondents also asserted in their Counterclaim that petitioner and her husband, by means of
fraud, undue influence and deceit were able to make Esperanza, who was already old and
illiterate, affix her thumbmark to the Affidavit dated 9 June 1986, wherein she renounced all her
rights and interest over the subject property in favor of petitioner and her husband.
Respondents thus prayed that the OCT issued in petitioners name be declared null and void
insofar as their two-thirds shares are concerned.
After trial, the MCTC rendered its Decision dated 6 April 1998 in Civil Case No. 156, declaring
petitioner and her husband as the true and lawful owners of the subject property. The decretal
portion of the MCTC Decision reads:
WHEREFORE, judgment is hereby rendered:
A. Declaring the [herein petitioner and her husband] the true, lawful and exclusive owners and
entitled to the possession of the [subject property] described and referred to under paragraph 2
of the [C]omplaint and covered by Tax Declaration No. 16666 in the names of the [petitioner and
her husband];
B. Ordering the [herein respondents] and anyone hired by, acting or working for them, to cease
and desist from asserting or claiming any right or interest in, or exercising any act of ownership
or possession over the [subject property];
C. Ordering the [respondents] to pay the [petitioner and her husband] the amount of P10,000.00
as attorneys fee. With cost against the [respondents].13
The respondents appealed the aforesaid MCTC Decision to the RTC. Their appeal was docketed
as Civil Case No. 5511.
Respondents argued in their appeal that the MCTC erred in not dismissing the Complaint filed
by the petitioner and her husband for failure to identify the subject property therein.
Respondents further faulted the MCTC for not declaring Esperanzas Affidavit dated 9 June
1986 -- relinquishing all her rights and interest over the subject property in favor of petitioner
and her husband -- as null and void insofar as respondents two-thirds share in the subject
property is concerned.
On 12 September 2000, the RTC rendered its Decision reversing the MCTC Decision dated 6
April 1998. The RTC adjudged respondents, as well as the other heirs of Martin Maglunob, as
the lawful owners and possessors of the entire subject property. The RTC decreed:
WHEREFORE, judgment is hereby rendered as follows:

As a consequence thereof, petitioner and her husband were compelled to institute Civil Case
No. 156.
In their Answer with Counterclaim in Civil Case No. 156, respondents averred that they coowned the subject property with Esperanza. Esperanza and her siblings, Tomas and Inocencia,
inherited the subject property, in equal shares, from their father Martin Maglunob (Martin I).

1) The appealed [D]ecision is REVERSED;


2) [Herein respondents] and the other heirs of Martin Maglunob are declared the lawful owners
and possessors of the whole [subject property] as described in Paragraph 2 of the [C]omplaint,
as against the [herein petitioner and her husband].

LEGFORMS ALS3C1415 | 13

3) [Petitioner and her husband] are ordered to immediately turn over possession of the [subject
property] to the [respondents] and the other heirs of Martin Maglunob; and
4) [Petitioner and her husband] are ordered to pay [respondents] attorneys fees of P5,000.00,
other litigation expenses of P5,000.00, moral damages of P10,000.00 and exemplary damages of
P5,000.00.14

until the institution of Civil Case No. 156 on 10 June 1994 before the MCTC, more than one year
had already elapsed. Considering that a Torrens title can only be attacked within one year after
the date of the issuance of the decree of registration on the ground of fraud and that such attack
must be through a direct proceeding, it was an error on the part of the RTC and the Court of
Appeals to declare OCT No. CLOA-1748 null and void.

Petitioner and her husband filed before the RTC, on 26 September 2000, a Motion for New Trial
or Reconsideration15 on the ground of newly discovered evidence consisting of a Deed of
Acceptance16 dated 23 September 2000, and notice17 of the same, which were both made by the
petitioner, for herself and in behalf of her husband,18 during the lifetime of Esperanza. In the
RTC Order19 dated 2 May 2001, however, the RTC denied the aforesaid Motion for New Trial or
Reconsideration.

Petitioner additionally posits that both the RTC and the Court of Appeals committed a mistake
in declaring null and void the Affidavit dated 9 June 1986 executed by Esperanza, waiving all
her rights and interest over the subject property in favor of petitioner and her husband.
Esperanzas Affidavit is a valid and binding proof of the transfer of ownership of the subject
property in petitioners name, as it was also coupled with actual delivery of possession of the
subject property to petitioner and her husband. The Affidavit is also proof of good faith on the
part of petitioner and her husband.

The petitioner and her husband then filed a Petition for Review, under Rule 42 of the 1997
Revised Rules of Civil Procedure, before the Court of Appeals, where the Petition was docketed
as CA-G.R. SP No. 64970.
In their Petition before the appellate court, petitioner and her husband raised the following
errors committed by the RTC in its 12 September 2000 Decision:
I. It erred in reversing the [D]ecision of the [MCTC];
II. It erred in declaring the [herein respondents] and the other heirs of Martin Maglunob as the
lawful owners and possessors of the whole [subject property];
III. It erred in declaring [OCT] No. CLOA-1748 in the name of [herein petitioner] Elvie T.
Arangote as null and void;
IV. It erred in denying [petitioner and her husbands] [M]otion for [N]ew [T]rial or
[R]econsideration dated [26 September 2000; and
V. It erred in not declaring the [petitioner and her husband] as possessors in good faith.20
On 27 October 2006, the Court of Appeals rendered a Decision denying the Petition for Review
of petitioner and her husband and affirming the RTC Decision dated 12 September 2000.
Petitioner and her husbands subsequent Motion for Reconsideration was similarly denied by
the Court of Appeals in its Resolution dated 29 June 2007.
Hence, petitioner21 now comes before this Court raising in her Petition the following issues:
I. Whether the [RTC] acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it declared the [petitioner and her husbands title to the subject property] null
and void;
II. Whether the [RTC] acted with grave abuse of discretion amounting to lack of jurisdiction
when it declared the Affidavit of Quitclaim null and void; and
III. Whether the [RTC] and the Honorable Court of Appeals acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it rejected petitioners claim as possessors (sic)
in good faith, hence, entitled to the rights provided in [Article] 448 and [Article] 546 of the Civil
Code.22
Petitioner contends that the aforesaid OCT No. CLOA-1748 was issued in her name on 26 March
1993 and was registered in the Registry of Deeds of Aklan on 20 April 1993. From 20 April 1993

Finally, petitioner argues that, assuming for the sake of argument, that Esperanzas Affidavit is
null and void, petitioner and her husband had no knowledge of any flaw in Esperanzas title
when the latter relinquished her rights to and interest in the subject property in their favor.
Hence, petitioner and her husband can be considered as possessors in good faith and entitled to
the rights provided under Articles 448 and 546 of the Civil Code.
This present Petition is devoid of merit.
It is a hornbook doctrine that the findings of fact of the trial court are entitled to great weight on
appeal and should not be disturbed except for strong and valid reasons, because the trial court is
in a better position to examine the demeanor of the witnesses while testifying. It is not a function
of this Court to analyze and weigh evidence by the parties all over again. This Courts
jurisdiction is, in principle, limited to reviewing errors of law that might have been committed
by the Court of Appeals.23 This rule, however, is subject to several exceptions,24 one of which is
present in this case, i.e., when the factual findings of the Court of Appeals and the trial court are
contradictory.
In this case, the findings of fact of the MCTC as regards the origin of the subject property are in
conflict with the findings of fact of both the RTC and the Court of Appeals. Hence, this Court
will have to examine the records to determine first the true origin of the subject property and to
settle whether the respondents have the right over the same for being co-heirs and co-owners,
together with their grand aunt, Esperanza, before this Court can resolve the issues raised by the
petitioner in her Petition.
After a careful scrutiny of the records, this Court affirms the findings of both the RTC and the
Court of Appeals as regards the origin of the subject property and the fact that respondents,
with their grand aunt Esperanza, were co-heirs and co-owners of the subject property.
The records disclosed that the subject property was part of a parcel of land25 situated in Maloco,
Ibajay, Aklan, consisting of 7,176 square meters and commonly owned in equal shares by the
siblings Pantaleon Maglunob (Pantaleon) and Placida Maglunob-Sorrosa (Placida). Upon the
death of Pantaleon and Placida, their surviving and legal heirs executed a Deed of Extrajudicial
Settlement and Partition of Estate in July 1981,26 however, the Deed was not notarized.
Considering that Pantaleon died without issue, his one-half share in the parcel of land he coowned with Placida passed on to his four siblings (or their respective heirs, if already deceased),
namely: Placida, Luis, Martin I, and Victoria, in equal shares.
LEGFORMS ALS3C1415 | 14

According to the aforementioned Deed of Extrajudicial Settlement and Partition of Estate, the
surviving and legal heirs of Pantaleon and Placida agreed to have the parcel of land commonly
owned by the siblings declared for real property tax purposes in the name of Victorino Sorrosa
(Victorino), Placidas husband. Thus, Tax Declarations No. 5988 (1942),27 No. 6200 (1945)28 and
No. 7233 (1953)29 were all issued in the name of Victorino.
Since Martin I already passed away when the Deed of Extrajudicial Settlement and Partition of
Estate was executed, his heirs30 were represented therein by Esperanza. By virtue of the said
Deed, Martin I received as inheritance a portion of the parcel of land measuring 897 square
meters.
After the death of Victorino, his heirs31 executed another Partition Agreement on 29 April 1985,
which was notarized on the same date. The Partition Agreement mentioned four parcels of land.
The subject property, consisting of a portion of the consolidated parcels 1, 2, and 3, and
measuring around 982 square meters, was allocated to Esperanza. In comparison, the property
given to Esperanza under the Partition Agreement is bigger than the one originally allocated to
her earlier under the Deed of Extrajudicial Settlement and Partition of Estate dated July 1981,
which had an area of only 897 square meters. It may be reasonably assumed, however, that the
subject property, measuring 982 square meters, allocated to Esperanza under the Partition
Agreement dated 29 April 1985, is already inclusive of the smaller parcel of 897 square meters
assigned to her under the Deed of Extrajudicial Settlement and Partition of Estate dated July
1981. As explained by the RTC in its 12 September 2000 Decision:
The [subject property] which is claimed by the [herein petitioner and her husband] and that
which is claimed by the [herein respondents] are one and the same, the difference in area and
technical description being due to the repartition and re-allocation of the parcel of land
originally co-owned by Pantaleon Maglunob and his sister Placida Maglunob and subsequently
declared in the name of [Victorino] under Tax Declaration No. 5988 of 1949.32
It is clear from the records that the subject property was not Esperanzas exclusive share, but
also that of the other heirs of her father, Martin I. Esperanza expressly affixed her thumbmark to
the Deed of Extrajudicial Settlement of July 1981 not only for herself, but also on behalf of the
other heirs of Martin I. Though in the Partition Agreement dated 29 April 1985 Esperanza
affixed her thumbmark without stating that she was doing so not only for herself, but also on
behalf of the other heirs of Martin I, this does not mean that Esperanza was already the exclusive
owner thereof. The evidence shows that the subject property is the share of the heirs of Martin I.
This is clear from the sketch33 attached to the Partition Agreement dated 29 April 1985, which
reveals the proportionate areas given to the heirs of the two siblings, Pantaleon and Placida,
who were the original owners of the whole parcel of land34 from which the subject property
was taken.
Further, it bears emphasis that the Partition Agreement was executed by and among the son,
grandsons, granddaughters and cousins of Victorino. Esperanza was neither the granddaughter
nor the cousin of Victorino, as she was only Victorinos grandniece. The cousin of Victorino is
Martin I, Esperanzas father. In effect, therefore, the subject property allotted to Esperanza in the
Partition Agreement was not her exclusive share, as she holds the same for and on behalf of the
other heirs of Martin I, who was already deceased at the time the Partition Agreement was
made.

To further bolster the truth that the subject property was not exclusively owned by Esperanza,
the Affidavit she executed in favor of petitioner and her husband on 6 June 1985 was worded as
follows:
That I hereby renounce, relinquish, waive and quitclaim all my rights, share, interest and
participation whatsoever in the [subject property] unto the said Sps. Ray Mars Arangote and
Elvira T. Arangote, their heirs, successors, and assigns including the improvement found
thereon;35
Logically, if Esperanza fully owned the subject property, she would have simply waived her
rights to and interest in the subject property, without mentioning her "share" and "participation"
in the same. By including such words in her Affidavit, Esperanza was aware of and was limiting
her waiver, renunciation, and quitclaim to her one-third share and participation in the subject
property.
Going to the issues raised by the petitioner in this Petition, this Court will resolve the same
concurrently as they are interrelated.
In this case, the petitioner derived her title to the subject property from the notarized Affidavit
executed by Esperanza, wherein the latter relinquished her rights, share, interest and
participation over the same in favor of the petitioner and her husband.
A careful perusal of the said Affidavit reveals that it is not what it purports to be. Esperanzas
Affidavit is, in fact, a Donation. Esperanzas real intent in executing the said Affidavit was to
donate her share in the subject property to petitioner and her husband.
As no onerous undertaking is required of petitioner and her husband under the said Affidavit,
the donation is regarded as a pure donation of an interest in a real property covered by Article
749 of the Civil Code.36 Article 749 of the Civil Code provides:
Art. 749. In order that the donation of an immovable may be valid, it must be made in a public
document, specifying therein the property donated and the value of the charges which the
donee must satisfy.
The acceptance may be made in the same deed of donation or in a separate public document,
but it shall not take effect unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall be notified thereof in an
authentic form, and this step shall be noted in both instruments.
From the aforesaid provision, there are three requisites for the validity of a simple donation of a
real property, to wit: (1) it must be made in a public instrument; (2) it must be accepted, which
acceptance may be made either in the same Deed of Donation or in a separate public instrument;
and (3) if the acceptance is made in a separate instrument, the donor must be notified in an
authentic form, and the same must be noted in both instruments.
This Court agrees with the RTC and the Court of Appeals that the Affidavit executed by
Esperanza relinquishing her rights, share, interest and participation over the subject property in
favor of the petitioner and her husband suffered from legal infirmities, as it failed to comply
with the aforesaid requisites of the law.
LEGFORMS ALS3C1415 | 15

In Sumipat v. Banga,37 this Court declared that title to immovable property does not pass from
the donor to the donee by virtue of a Deed of Donation until and unless it has been accepted in a
public instrument and the donor duly notified thereof. The acceptance may be made in the very
same instrument of donation. If the acceptance does not appear in the same document, it must
be made in another. Where the Deed of Donation fails to show the acceptance, or where the
formal notice of the acceptance, made in a separate instrument, is either not given to the donor
or else not noted in the Deed of Donation and in the separate acceptance, the donation is null
and void.38
In the present case, the said Affidavit, which is tantamount to a Deed of Donation, met the first
requisite, as it was notarized; thus, it became a public instrument. Nevertheless, it failed to meet
the aforesaid second and third requisites. The acceptance of the said donation was not made by
the petitioner and her husband either in the same Affidavit or in a separate public instrument.
As there was no acceptance made of the said donation, there was also no notice of the said
acceptance given to the donor, Esperanza. Therefore, the Affidavit executed by Esperanza in
favor of petitioner and her husband is null and void.
The subsequent notarized Deed of Acceptance39 dated 23 September 2000, as well as the
notice40 of such acceptance, executed by the petitioner did not cure the defect. Moreover, it was
only made by the petitioner several years after the Complaint was filed in court, or when the
RTC had already rendered its Decision dated 12 September 2000, although it was still during
Esperanzas lifetime. Evidently, its execution was a mere afterthought, a belated attempt to cure
what was a defective donation.
It is true that the acceptance of a donation may be made at any time during the lifetime of the
donor. And granting arguendo that such acceptance may still be admitted in evidence on
appeal, there is still need for proof that a formal notice of such acceptance was received by the
donor and noted in both the Deed of Donation and the separate instrument embodying the
acceptance.41 At the very least, this last legal requisite of annotation in both instruments of
donation and acceptance was not fulfilled by the petitioner. Neither the Affidavit nor the Deed
of Acceptance bears the fact that Esperanza received notice of the acceptance of the donation by
petitioner. For this reason, even Esperanzas one-third share in the subject property cannot be
adjudicated to the petitioner.
With the foregoing, this Court holds that the RTC and the Court of Appeals did not err in
declaring null and void Esperanzas Affidavit.
The next issue to be resolved then is whether the RTC, as well as the Court of Appeals, erred in
declaring OCT No. CLOA-1748 in the name of petitioner and her husband null and void.
Again, this Court answers the said issue in the negative.
Section 48 of Presidential decree No. 1529 states:
SEC. 48. Certificate not subject to collateral attack. - A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in
accordance with law.
Such proscription has long been enshrined in Philippine jurisprudence. The judicial action
required to challenge the validity of title is a direct attack, not a collateral attack.42

The attack is considered direct when the object of an action is to annul or set aside such
proceeding, or enjoin its enforcement. Conversely, an attack is indirect or collateral when, in an
action to obtain a different relief, an attack on the proceeding is nevertheless made as an incident
thereof. Such action to attack a certificate of title may be an original action or a counterclaim, in
which a certificate of title is assailed as void.43
A counterclaim is considered a new suit in which the defendant is the plaintiff and the plaintiff
in the complaint becomes the defendant. It stands on the same footing as, and is to be tested by
the same rules as if it were, an independent action.44
In their Answer to the Complaint for Quieting of Title filed by the petitioner and her husband
before the MCTC, respondents included therein a Counterclaim wherein they repleaded all the
material allegations in their affirmative defenses, the most essential of which was their claim
that petitioner and her husband -- by means of fraud, undue influence and deceit -- were able to
make their grand aunt, Esperanza, who was already old and illiterate, affix her thumbmark to
the Affidavit, wherein she renounced, waived, and quitclaimed all her rights and interest over
the subject property in favor of petitioner and her husband. In addition, respondents maintained
in their Answer that as petitioner and her husband were not tenants either of Esperanza or of
the respondents, the DAR could not have validly issued in favor of petitioner and her husband
OCT No. CLOA-1748. Thus, the respondents prayed, in their counterclaim in Civil Case No. 156
before the MCTC, that OCT No. CLOA-1748 issued in the name of petitioner, married to Ray
Mars E. Arangote, be declared null and void, insofar as their two-thirds shares in the subject
property are concerned.
It is clear, thus, that respondents Answer with Counterclaim was a direct attack on petitioners
certificate of title. Furthermore, since all the essential facts of the case for the determination of
the validity of the title are now before this Court, to require respondents to institute a separate
cancellation proceeding would be pointlessly circuitous and against the best interest of justice.
Esperanzas Affidavit, which was the sole basis of petitioners claim to the subject property, has
been declared null and void. Moreover, petitioner and her husband were not tenants of the
subject property. In fact, petitioner herself admitted in her Complaint filed before the MCTC
that her husband is out of the country, rendering it impossible for him to work on the subject
property as a tenant. Instead of cultivating the subject property, petitioner and her husband
possessed the same by constructing a house thereon. Thus, it is highly suspicious how the
petitioner was able to secure from the DAR a Certificate of Land Ownership Award (CLOA)
over the subject property. The DAR awards such certificates to the grantees only if they fulfill
the requirements of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian
Reform Program (CARP).45 Hence, the RTC and the Court of Appeals did not err in declaring
null and void OCT No. CLOA-1748 in the name of the petitioner, married to Ray Mars E.
Arangote.
Considering that Esperanza died without any compulsory heirs and that the supposed donation
of her one-third share in the subject property per her Affidavit dated 9 June 1985 was already
declared null and void, Esperanzas one-third share in the subject property passed on to her
legal heirs, the respondents.
As petitioners last-ditch effort, she claims that she is a possessor in good faith and, thus, entitled
to the rights provided for under Articles 448 and 546 of the Civil Code.

LEGFORMS ALS3C1415 | 16

This claim is untenable.


The Civil Code describes a possessor in good faith as follows:
Art. 526. He is deemed a possessor in good faith who is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it.
He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.
Mistake upon a doubtful or difficult question of law may be the basis of good faith.
Art. 1127. The good faith of the possessor consists in the reasonable belief that the person from
whom he received the thing was the owner thereof, and could transmit his ownership.
Possession in good faith ceases from the moment defects in the title are made known to the
possessor by extraneous evidence or by a suit for recovery of the property by the true owner.
Every possessor in good faith becomes a possessor in bad faith from the moment he becomes
aware that what he believed to be true is not so.46
In the present case, when respondents came to know that an OCT over the subject property was
issued and registered in petitioners name on 26 March 1993, respondents brought a Complaint
on 7 August 1993 before the Lupon of Barangay Maloco, Ibajay, Aklan, challenging the title of
petitioner to the subject property on the basis that said property constitutes the inheritance of
respondent, together with their grandaunt Esperanza, so Esperanza had no authority to
relinquish the entire subject property to petitioner. From that moment, the good faith of the
petitioner had ceased. Petitioner cannot be entitled to the rights under Articles 448 and 546 of
the Civil Code, because the rights mentioned therein are applicable only to builders in good
faith and not to possessors in good faith.
Moreover, the petitioner cannot be considered a builder in good faith of the house on the subject
property. In the context that such term is used in particular reference to Article 448 of the Civil
Code, a builder in good faith is one who, not being the owner of the land, builds on that land,
believing himself to be its owner and unaware of any defect in his title or mode of acquisition.47
The various provisions of the Civil Code, pertinent to the subject, read:
Article 448. The owner of the land on which anything has been built, sown, or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is considerably more than that of
the building or trees. In such a case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of disagreement, the court shall fix the terms
thereof.1avvphi1
Article 449. He who builds, plants, or sows in bad faith on the land of another, loses what is
built, planted or sown without right to indemnity.

order to replace things in their former condition at the expense of the person who built, planted
or sowed; or he may compel the builder or planter to pay the price of the land, and the sower
the proper rent.
Under the foregoing provisions, the builder in good faith can compel the landowner to make a
choice between appropriating the building by paying the proper indemnity or obliging the
builder to pay the price of the land. The choice belongs to the owner of the land, a rule that
accords with the principle of accession, i.e., that the accessory follows the principal and not the
other way around. Even as the option lies with the landowner, the grant to him, nevertheless, is
preclusive. He must choose one. He cannot, for instance, compel the owner of the building to
instead remove it from the land. In order, however, that the builder can invoke that accruing
benefit and enjoy his corresponding right to demand that a choice be made by the landowner, he
should be able to prove good faith on his part.48
Good faith, here understood, is an intangible and abstract quality with no technical meaning or
statutory definition, and it encompasses, among other things, an honest belief, the absence of
malice and the absence of design to defraud or to seek an unconscionable advantage. An
individuals personal good faith is a concept of his own mind and, therefore, may not
conclusively be determined by his protestations alone. It implies honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder upon inquiry. The
essence of good faith lies in an honest belief in the validity of ones right, ignorance of a superior
claim, and absence of intention to overreach another. Applied to possession, one is considered in
good faith if he is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it.49
In this case, the subject property waived and quitclaimed by Esperanza to the petitioner and her
husband in the Affidavit was only covered by a tax declaration in the name of Esperanza.
Petitioner did not even bother to look into the origin of the subject property and to probe into
the right of Esperanza to relinquish the same. Thus, when petitioner and her husband built a
house thereon in 1989 they cannot be considered to have acted in good faith as they were fully
aware that when Esperanza executed an Affidavit relinquishing in their favor the subject
property the only proof of Esperanzas ownership over the same was a mere tax declaration.
This fact or circumstance alone was enough to put the petitioner and her husband under
inquiry. Settled is the rule that a tax declaration does not prove ownership. It is merely an
indicium of a claim of ownership. Payment of taxes is not proof of ownership; it is, at best, an
indicium of possession in the concept of ownership. Neither tax receipts nor a declaration of
ownership for taxation purposes is evidence of ownership or of a right to possess realty when
not supported by other effective proofs.50
With the foregoing, the petitioner is not entitled to the rights under Article 448 and 546 as the
petitioner is not a builder and possessor in good faith.
WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 64970, dated 27 October 2006 and 29 June
2007, respectively, affirming the RTC Decision dated 12 September 2000 in Civil Case No. 5511
and declaring the respondents the lawful owners and possessors of the subject property are
hereby AFFIRMED. No costs.

Article 450. The owner of the land on which anything has been built, planted or sown in bad
faith may demand the demolition of the work, or that the planting or sowing be removed, in
LEGFORMS ALS3C1415 | 17

PARTNERSHIP WHERE IMMOVABLE IS CONTRIBUTED

The project did not push through, and the land was subsequently foreclosed by the bank.

1.

According to petitioners, the project failed because of "respondent's lack of funds or means and
skills." They add that respondent used the loan not for the development of the subdivision, but
in furtherance of his own company, Universal Umbrella Company.

CIVIL CODE, ARTICLES 1771 TO 1773

Art. 1771. A partnership may be constituted in any form, except where immovable property or
real rights are contributed thereto, in which case a public instrument shall be necessary. (1667a)
Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in
money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.
Failure to comply with the requirements of the preceding paragraph shall not affect the liability
of the partnership and the members thereof to third persons. (n)
Art. 1773. A contract of partnership is void, whenever immovable property is contributed
thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument. (1668a)

2.

TORRES V. COURT OF APPEALS, G.R. NO. 134559, 9 DECEMBER 1999

Courts may not extricate parties from the necessary consequences of their acts. That the terms of
a contract turn out to be financially disadvantageous to them will not relieve them of their
obligations therein. The lack of an inventory of real property will not ipso facto release the
contracting partners from their respective obligations to each other arising from acts executed in
accordance with their agreement.

On the other hand, respondent alleged that he used the loan to implement the Agreement. With
the said amount, he was able to effect the survey and the subdivision of the lots. He secured the
Lapu Lapu City Council's approval of the subdivision project which he advertised in a local
newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered
into a contract with an engineering firm for the building of sixty low-cost housing units and
actually even set up a model house on one of the subdivision lots. He did all of these for a total
expense of P85,000.
Respondent claimed that the subdivision project failed, however, because petitioners and their
relatives had separately caused the annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the project. 5
Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who
were however acquitted. Thereafter, they filed the present civil case which, upon respondent's
motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal,
however, the appellate court remanded the case for further proceedings. Thereafter, the RTC
issued its assailed Decision, which, as earlier stated, was affirmed by the CA.
Hence, this Petition. 6
Ruling of the Court of Appeals

The Petition for Review on Certiorari before us assails the March 5, 1998 Decision 1 of the Court
of Appeals 2 (CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolution denying
reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of
Cebu City in Civil Case No. R-21208, which disposed as follows:

In affirming the trial court, the Court of Appeals held that petitioners and respondent had
formed a partnership for the development of the subdivision. Thus, they must bear the loss
suffered by the partnership in the same proportion as their share in the profits stipulated in the
contract. Disagreeing with the trial court's pronouncement that losses as well as profits in a joint
venture should be distributed equally, 7 the CA invoked Article 1797 of the Civil Code which
provides:

WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and
against the plaintiffs, orders the dismissal of the plaintiffs complaint. The counterclaims of the
defendant are likewise ordered dismissed. No pronouncement as to costs. 3

Art. 1797 The losses and profits shall be distributed in conformity with the agreement. If only
the share of each partner in the profits has been agreed upon, the share of each in the losses shall
be in the same proportion.

The Facts

The CA elucidated further:

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of
land in favor of respondent, who then had it registered in his name. By mortgaging the
property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint
Venture Agreement, was to be used for the development of the subdivision. 4 All three of them
also agreed to share the proceeds from the sale of the subdivided lots.

In the absence of stipulation, the share of each partner in the profits and losses shall be in
proportion to what he may have contributed, but the industrial partner shall not be liable for the
losses. As for the profits, the industrial partner shall receive such share as may be just and
equitable under the circumstances. If besides his services he has contributed capital, he shall also
receive a share in the profits in proportion to his capital.

The Case

LEGFORMS ALS3C1415 | 18

The Issue
Petitioners impute to the Court of Appeals the following error:

(P25,513.50) Philippine Currency, for 1,700 square meters at ONE [PESO] & FIFTY CTVS. (P1.50)
Philippine Currency, in favor of the FIRST PARTY, but the SECOND PARTY did not actually
receive the payment.

. . . [The] Court of Appeals erred in concluding that the transaction


. . . between the petitioners and respondent was that of a joint venture/partnership, ignoring
outright the provision of Article 1769, and other related provisions of the Civil Code of the
Philippines. 8

SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the necessary
amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, for their personal
obligations and this particular amount will serve as an advance payment from the FIRST PARTY
for the property mentioned to be sub-divided and to be deducted from the sales.

The Court's Ruling

THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the interest and the
principal amount involving the amount of TWENTY THOUSAND (P20,000.00) Pesos,
Philippine Currency, until the sub-division project is terminated and ready for sale to any
interested parties, and the amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine
currency, will be deducted accordingly.

The Petition is bereft of merit.


Main Issue:
Existence of a Partnership
Petitioners deny having formed a partnership with respondent. They contend that the Joint
Venture Agreement and the earlier Deed of Sale, both of which were the bases of the appellate
court's finding of a partnership, were void.
In the same breath, however, they assert that under those very same contracts, respondent is
liable for his failure to implement the project. Because the agreement entitled them to receive 60
percent of the proceeds from the sale of the subdivision lots, they pray that respondent pay
them damages equivalent to 60 percent of the value of the property. 9
The pertinent portions of the Joint Venture Agreement read as follows:
KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March,
1969, by and between MR. MANUEL R. TORRES, . . . the FIRST PARTY, likewise, MRS.
ANTONIA B. TORRES, and MISS EMETERIA BARING, . . . the SECOND PARTY:
WITNESSETH:
That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this property
located at Lapu-Lapu City, Island of Mactan, under Lot No. 1368 covering TCT No. T-0184 with
a total area of 17,009 square meters, to be sub-divided by the FIRST PARTY;
Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY
THOUSAND (P20,000.00) Pesos, Philippine Currency upon the execution of this contract for the
property entrusted by the SECOND PARTY, for sub-division projects and development
purposes;
NOW THEREFORE, for and in consideration of the above covenants and promises herein
contained the respective parties hereto do hereby stipulate and agree as follows:
ONE: That the SECOND PARTY signed an absolute Deed of Sale . . . dated March 5, 1969, in the
amount of TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS.

FOURTH: That all general expense[s] and all cost[s] involved in the sub-division project should
be paid by the FIRST PARTY, exclusively and all the expenses will not be deducted from the
sales after the development of the sub-division project.
FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM 60% for
the SECOND PARTY and FORTY PERCENTUM 40% for the FIRST PARTY, and additional
profits or whatever income deriving from the sales will be divided equally according to the . . .
percentage [agreed upon] by both parties.
SIXTH: That the intended sub-division project of the property involved will start the work and
all improvements upon the adjacent lots will be negotiated in both parties['] favor and all sales
shall [be] decided by both parties.
SEVENTH: That the SECOND PARTIES, should be given an option to get back the property
mentioned provided the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, borrowed by the SECOND PARTY, will be paid in full to the FIRST PARTY,
including all necessary improvements spent by the FIRST PARTY, and-the FIRST PARTY will be
given a grace period to turnover the property mentioned above.
That this AGREEMENT shall be binding and obligatory to the parties who executed same freely
and voluntarily for the uses and purposes therein stated. 10
A reading of the terms embodied in the Agreement indubitably shows the existence of a
partnership pursuant to Article 1767 of the Civil Code, which provides:
Art. 1767. By the contract of partnership two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profits
among themselves.
Under the above-quoted Agreement, petitioners would contribute property to the partnership in
the form of land which was to be developed into a subdivision; while respondent would give, in
addition to his industry, the amount needed for general expenses and other costs. Furthermore,
the income from the said project would be divided according to the stipulated percentage.
Clearly, the contract manifested the intention of the parties to form a partnership. 11

LEGFORMS ALS3C1415 | 19

It should be stressed that the parties implemented the contract. Thus, petitioners transferred the
title to the land to facilitate its use in the name of the respondent. On the other hand, respondent
caused the subject land to be mortgaged, the proceeds of which were used for the survey and
the subdivision of the land. As noted earlier, he developed the roads, the curbs and the gutters
of the subdivision and entered into a contract to construct low-cost housing units on the
property.
Respondent's actions clearly belie petitioners' contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or
property, but also industry.

Second, petitioners themselves invoke the allegedly void contract as basis for their claim that
respondent should pay them 60 percent of the value of the property. 13 They cannot in one
breath deny the contract and in another recognize it, depending on what momentarily suits their
purpose. Parties cannot adopt inconsistent positions in regard to a contract and courts will not
tolerate, much less approve, such practice.
In short, the alleged nullity of the partnership will not prevent courts from considering the Joint
Venture Agreement an ordinary contract from which the parties' rights and obligations to each
other may be inferred and enforced.
Partnership Agreement Not the Result of an Earlier Illegal Contract

Petitioners Bound by Terms of Contract


Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been
expressly stipulated, but also to all necessary consequences thereof, as follows:
Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound
not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.
It is undisputed that petitioners are educated and are thus presumed to have understood the
terms of the contract they voluntarily signed. If it was not in consonance with their expectations,
they should have objected to it and insisted on the provisions they wanted.

Petitioners also contend that the Joint Venture Agreement is void under Article 1422 14 of the
Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of
the land without valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the consideration for
the sale was the expectation of profits from the subdivision project. Its first stipulation states that
petitioners did not actually receive payment for the parcel of land sold to respondent.
Consideration, more properly denominated as cause, can take different forms, such as the
prestation or promise of a thing or service by another. 15

Courts are not authorized to extricate parties from the necessary consequences of their acts, and
the fact that the contractual stipulations may turn out to be financially disadvantageous will not
relieve parties thereto of their obligations. They cannot now disavow the relationship formed
from such agreement due to their supposed misunderstanding of its terms.

In this case, the cause of the contract of sale consisted not in the stated peso value of the land,
but in the expectation of profits from the subdivision project, for which the land was intended to
be used. As explained by the trial court, "the land was in effect given to the partnership as
[petitioner's] participation therein. . . . There was therefore a consideration for the sale, the
[petitioners] acting in the expectation that, should the venture come into fruition, they [would]
get sixty percent of the net profits."

Alleged Nullity of the Partnership Agreement

Liability of the Parties

Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code,
which provides:

Claiming that rerpondent was solely responsible for the failure of the subdivision project,
petitioners maintain that he should be made to pay damages equivalent to 60 percent of the
value of the property, which was their share in the profits under the Joint Venture Agreement.

Art. 1773. A contract of partnership is void, whenever immovable property is contributed


thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument.
They contend that since the parties did not make, sign or attach to the public instrument an
inventory of the real property contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent
Arturo M. Tolentino states that under the aforecited provision which is a complement of Article
1771, 12 "The execution of a public instrument would be useless if there is no inventory of the
property contributed, because without its designation and description, they cannot be subject to
inscription in the Registry of Property, and their contribution cannot prejudice third persons.
This will result in fraud to those who contract with the partnership in the belief [in] the efficacy
of the guaranty in which the immovables may consist. Thus, the contract is declared void by the
law when no such inventory is made." The case at bar does not involve third parties who may be
prejudiced.

We are not persuaded. True, the Court of Appeals held that petitioners' acts were not the cause
of the failure of the project. 16 But it also ruled that neither was respondent responsible therefor.
17 In imputing the blame solely to him, petitioners failed to give any reason why we should
disregard the factual findings of the appellate court relieving him of fault. Verily, factual issues
cannot be resolved in a petition for review under Rule 45, as in this case. Petitioners have not
alleged, not to say shown, that their Petition constitutes one of the exceptions to this doctrine. 18
Accordingly, we find no reversible error in the CA's ruling that petitioners are not entitled to
damages.
WHEREFORE, the Perition is hereby DENIED and the challenged Decision AFFIRMED. Costs
against petitioners.

LEGFORMS ALS3C1415 | 20

3.

LITONJUA V. LITONJUA, G. R. NO. 166299-300, 13 DECEMBER 2005

In this petition for review under Rule 45 of the Rules of Court, petitioner Aurelio K. Litonjua, Jr.
seeks to nullify and set aside the Decision of the Court of Appeals (CA) dated March 31, 20041 in
consolidated cases C.A. G.R. Sp. No. 76987 and C.A. G.R. SP. No 78774 and its Resolution dated
December 07, 2004,2 denying petitioners motion for reconsideration.
The recourse is cast against the following factual backdrop:
Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein respondent Eduardo K. Litonjua, Sr.
(Eduardo) are brothers. The legal dispute between them started when, on December 4, 2002, in
the Regional Trial Court (RTC) at Pasig City, Aurelio filed a suit against his brother Eduardo
and herein respondent Robert T. Yang (Yang) and several corporations for specific performance
and accounting. In his complaint,3 docketed as Civil Case No. 69235 and eventually raffled to
Branch 68 of the court,4 Aurelio alleged that, since June 1973, he and Eduardo are into a joint
venture/partnership arrangement in the Odeon Theater business which had expanded thru
investment in Cineplex, Inc., LCM Theatrical Enterprises, Odeon Realty Corporation (operator
of Odeon I and II theatres), Avenue Realty, Inc., owner of lands and buildings, among other
corporations. Yang is described in the complaint as petitioners and Eduardos partner in their
Odeon Theater investment.5 The same complaint also contained the following material
averments:
3.01 On or about 22 June 1973, [Aurelio] and Eduardo entered into a joint venture/partnership
for the continuation of their family business and common family funds .
3.01.1 This joint venture/[partnership] agreement was contained in a memorandum addressed
by Eduardo to his siblings, parents and other relatives. Copy of this memorandum is attached
hereto and made an integral part as Annex "A" and the portion referring to [Aurelio] submarked
as Annex "A-1".
3.02 It was then agreed upon between [Aurelio] and Eduardo that in consideration of [Aurelios]
retaining his share in the remaining family businesses (mostly, movie theaters, shipping and
land development) and contributing his industry to the continued operation of these businesses,
[Aurelio] will be given P1 Million or 10% equity in all these businesses and those to be
subsequently acquired by them whichever is greater. . . .
4.01 from 22 June 1973 to about August 2001, or [in] a span of 28 years, [Aurelio] and
Eduardo had accumulated in their joint venture/partnership various assets including but not
limited to the corporate defendants and [their] respective assets.
4.02 In addition . . . the joint venture/partnership had also acquired [various other assets], but
Eduardo caused to be registered in the names of other parties.
xxx xxx xxx
4.04 The substantial assets of most of the corporate defendants consist of real properties . A
list of some of these real properties is attached hereto and made an integral part as Annex "B".
xxx xxx xxx

5.02 Sometime in 1992, the relations between [Aurelio] and Eduardo became sour so that
[Aurelio] requested for an accounting and liquidation of his share in the joint
venture/partnership [but these demands for complete accounting and liquidation were not
heeded].
xxx xxx xxx
5.05 What is worse, [Aurelio] has reasonable cause to believe that Eduardo and/or the corporate
defendants as well as Bobby [Yang], are transferring . . . various real properties of the
corporations belonging to the joint venture/partnership to other parties in fraud of [Aurelio]. In
consequence, [Aurelio] is therefore causing at this time the annotation on the titles of these real
properties a notice of lis pendens . (Emphasis in the original; underscoring and words in
bracket added.)
For ease of reference, Annex "A-1" of the complaint, which petitioner asserts to have been meant
for him by his brother Eduardo, pertinently reads:
10) JR. (AKL) [Referring to petitioner Aurelio K. Litonjua]:
You have now your own life to live after having been married. .
I am trying my best to mold you the way I work so you can follow the pattern . You will be
the only one left with the company, among us brothers and I will ask you to stay as I want you
to run this office every time I am away. I want you to run it the way I am trying to run it because
I will be all alone and I will depend entirely to you (sic). My sons will not be ready to help me
yet until about maybe 15/20 years from now. Whatever is left in the corporation, I will make
sure that you get ONE MILLION PESOS (P1,000,000.00) or ten percent (10%) equity, whichever
is greater. We two will gamble the whole thing of what I have and what you are entitled to. . It
will be you and me alone on this. If ever I pass away, I want you to take care of all of this. You
keep my share for my two sons are ready take over but give them the chance to run the
company which I have built.
xxx xxx xxx
Because you will need a place to stay, I will arrange to give you first ONE HUNDRED
THOUSANDS PESOS: (P100, 000.00) in cash or asset, like Lt. Artiaga so you can live better there.
The rest I will give you in form of stocks which you can keep. This stock I assure you is good
and saleable. I will also gladly give you the share of Wack-Wack and Valley Golf because
you have been good. The rest will be in stocks from all the corporations which I repeat, ten
percent (10%) equity. 6
On December 20, 2002, Eduardo and the corporate respondents, as defendants a quo, filed a
joint ANSWER With Compulsory Counterclaim denying under oath the material allegations of
the complaint, more particularly that portion thereof depicting petitioner and Eduardo as
having entered into a contract of partnership. As affirmative defenses, Eduardo, et al., apart
from raising a jurisdictional matter, alleged that the complaint states no cause of action, since no
cause of action may be derived from the actionable document, i.e., Annex "A-1", being void
under the terms of Article 1767 in relation to Article 1773 of the Civil Code, infra. It is further
alleged that whatever undertaking Eduardo agreed to do, if any, under Annex "A-1", are
unenforceable under the provisions of the Statute of Frauds.7
LEGFORMS ALS3C1415 | 21

For his part, Yang - who was served with summons long after the other defendants submitted
their answer moved to dismiss on the ground, inter alia, that, as to him, petitioner has no cause
of action and the complaint does not state any.8 Petitioner opposed this motion to dismiss.
On January 10, 2003, Eduardo, et al., filed a Motion to Resolve Affirmative Defenses.9 To this
motion, petitioner interposed an Opposition with ex-Parte Motion to Set the Case for Pre-trial.10

upon which petitioner solely predicates his right/s allegedly violated by Eduardo, Yang and the
corporate defendants a quo is "void or legally inexistent".
In time, petitioner moved for reconsideration but his motion was denied by the CA in its equally
assailed Resolution of December 7, 2004.18 .
Hence, petitioners present recourse, on the contention that the CA erred:

Acting on the separate motions immediately adverted to above, the trial court, in an Omnibus
Order dated March 5, 2003, denied the affirmative defenses and, except for Yang, set the case for
pre-trial on April 10, 2003.11
In another Omnibus Order of April 2, 2003, the same court denied the motion of Eduardo, et al.,
for reconsideration12 and Yangs motion to dismiss. The following then transpired insofar as
Yang is concerned:
1. On April 14, 2003, Yang filed his ANSWER, but expressly reserved the right to seek
reconsideration of the April 2, 2003 Omnibus Order and to pursue his failed motion to dismiss13
to its full resolution.

A. When it ruled that there was no partnership created by the actionable document because this
was not a public instrument and immovable properties were contributed to the partnership.
B. When it ruled that the actionable document did not create a demandable right in favor of
petitioner.
C. When it ruled that the complaint stated no cause of action against [respondent] Robert Yang;
and
D. When it ruled that petitioner has changed his theory on appeal when all that Petitioner had
done was to support his pleaded cause of action by another legal perspective/argument.

2. On April 24, 2003, he moved for reconsideration of the Omnibus Order of April 2, 2003, but
his motion was denied in an Order of July 4, 2003.14

The petition lacks merit.

3. On August 26, 2003, Yang went to the Court of Appeals (CA) in a petition for certiorari under
Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 78774,15 to nullify the separate orders
of the trial court, the first denying his motion to dismiss the basic complaint and, the second,
denying his motion for reconsideration.

Petitioners demand, as defined in the petitory portion of his complaint in the trial court, is for
delivery or payment to him, as Eduardos and Yangs partner, of his partnership/joint venture
share, after an accounting has been duly conducted of what he deems to be partnership/joint
venture property.19

Earlier, Eduardo and the corporate defendants, on the contention that grave abuse of discretion
and injudicious haste attended the issuance of the trial courts aforementioned Omnibus Orders
dated March 5, and April 2, 2003, sought relief from the CA via similar recourse. Their petition
for certiorari was docketed as CA G.R. SP No. 76987.

A partnership exists when two or more persons agree to place their money, effects, labor, and
skill in lawful commerce or business, with the understanding that there shall be a proportionate
sharing of the profits and losses between them.20 A contract of partnership is defined by the
Civil Code as one where two or more persons bound themselves to contribute money, property,
or industry to a common fund with the intention of dividing the profits among themselves.21 A
joint venture, on the other hand, is hardly distinguishable from, and may be likened to, a
partnership since their elements are similar, i.e., community of interests in the business and
sharing of profits and losses. Being a form of partnership, a joint venture is generally governed
by the law on partnership.22

Per its resolution dated October 2, 2003,16 the CAs 14th Division ordered the consolidation of
CA G.R. SP No. 78774 with CA G.R. SP No. 76987.
Following the submission by the parties of their respective Memoranda of Authorities, the
appellate court came out with the herein assailed Decision dated March 31, 2004, finding for
Eduardo and Yang, as lead petitioners therein, disposing as follows:
WHEREFORE, judgment is hereby rendered granting the issuance of the writ of certiorari in
these consolidated cases annulling, reversing and setting aside the assailed orders of the court a
quo dated March 5, 2003, April 2, 2003 and July 4, 2003 and the complaint filed by private
respondent [now petitioner Aurelio] against all the petitioners [now herein respondents
Eduardo, et al.] with the court a quo is hereby dismissed.

The underlying issue that necessarily comes to mind in this proceedings is whether or not
petitioner and respondent Eduardo are partners in the theatre, shipping and realty business, as
one claims but which the other denies. And the issue bearing on the first assigned error relates
to the question of what legal provision is applicable under the premises, petitioner seeking, as it
were, to enforce the actionable document - Annex "A-1" - which he depicts in his complaint to be
the contract of partnership/joint venture between himself and Eduardo. Clearly, then, a look at
the legal provisions determinative of the existence, or defining the formal requisites, of a
partnership is indicated. Foremost of these are the following provisions of the Civil Code:

SO ORDERED.17 (Emphasis in the original; words in bracket added.)


Explaining its case disposition, the appellate court stated, inter alia, that the alleged partnership,
as evidenced by the actionable documents, Annex "A" and "A-1" attached to the complaint, and

Art. 1771. A partnership may be constituted in any form, except where immovable property or
real rights are contributed thereto, in which case a public instrument shall be necessary.

LEGFORMS ALS3C1415 | 22

Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in
money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.

as earlier stated, petitioner himself admitted contributing his share in the supposed shipping,
movie theatres and realty development family businesses which already owned immovables
even before Annex "A-1" was allegedly executed.

Failure to comply with the requirement of the preceding paragraph shall not affect the liability
of the partnership and the members thereof to third persons.

Considering thus the value and nature of petitioners alleged contribution to the purported
partnership, the Court, even if so disposed, cannot plausibly extend Annex "A-1" the legal
effects that petitioner so desires and pleads to be given. Annex "A-1", in fine, cannot support the
existence of the partnership sued upon and sought to be enforced. The legal and factual milieu
of the case calls for this disposition. A partnership may be constituted in any form, save when
immovable property or real rights are contributed thereto or when the partnership has a capital
of at least P3,000.00, in which case a public instrument shall be necessary.25 And if only to stress
what has repeatedly been articulated, an inventory to be signed by the parties and attached to
the public instrument is also indispensable to the validity of the partnership whenever
immovable property is contributed to it.

Art. 1773. A contract of partnership is void, whenever immovable property is contributed


thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument.
Annex "A-1", on its face, contains typewritten entries, personal in tone, but is unsigned and
undated. As an unsigned document, there can be no quibbling that Annex "A-1" does not meet
the public instrumentation requirements exacted under Article 1771 of the Civil Code.
Moreover, being unsigned and doubtless referring to a partnership involving more than
P3,000.00 in money or property, Annex "A-1" cannot be presented for notarization, let alone
registered with the Securities and Exchange Commission (SEC), as called for under the Article
1772 of the Code. And inasmuch as the inventory requirement under the succeeding Article 1773
goes into the matter of validity when immovable property is contributed to the partnership, the
next logical point of inquiry turns on the nature of petitioners contribution, if any, to the
supposed partnership.
The CA, addressing the foregoing query, correctly stated that petitioners contribution consisted
of immovables and real rights. Wrote that court:
A further examination of the allegations in the complaint would show that [petitioners]
contribution to the so-called "partnership/joint venture" was his supposed share in the family
business that is consisting of movie theaters, shipping and land development under paragraph
3.02 of the complaint. In other words, his contribution as a partner in the alleged
partnership/joint venture consisted of immovable properties and real rights. .23
Significantly enough, petitioner matter-of-factly concurred with the appellate courts
observation that, prescinding from what he himself alleged in his basic complaint, his
contribution to the partnership consisted of his share in the Litonjua family businesses which
owned variable immovable properties. Petitioners assertion in his motion for reconsideration24
of the CAs decision, that "what was to be contributed to the business [of the partnership] was
[petitioners] industry and his share in the family [theatre and land development] business"
leaves no room for speculation as to what petitioner contributed to the perceived partnership.
Lest it be overlooked, the contract-validating inventory requirement under Article 1773 of the
Civil Code applies as long real property or real rights are initially brought into the partnership.
In short, it is really of no moment which of the partners, or, in this case, who between petitioner
and his brother Eduardo, contributed immovables. In context, the more important consideration
is that real property was contributed, in which case an inventory of the contributed property
duly signed by the parties should be attached to the public instrument, else there is legally no
partnership to speak of.
Petitioner, in an obvious bid to evade the application of Article 1773, argues that the immovables
in question were not contributed, but were acquired after the formation of the supposed
partnership. Needless to stress, the Court cannot accord cogency to this specious argument. For,

Given the foregoing perspective, what the appellate court wrote in its assailed Decision26 about
the probative value and legal effect of Annex "A-1" commends itself for concurrence:
Considering that the allegations in the complaint showed that [petitioner] contributed
immovable properties to the alleged partnership, the "Memorandum" (Annex "A" of the
complaint) which purports to establish the said "partnership/joint venture" is NOT a public
instrument and there was NO inventory of the immovable property duly signed by the parties.
As such, the said "Memorandum" is null and void for purposes of establishing the existence
of a valid contract of partnership. Indeed, because of the failure to comply with the essential
formalities of a valid contract, the purported "partnership/joint venture" is legally inexistent
and it produces no effect whatsoever. Necessarily, a void or legally inexistent contract cannot be
the source of any contractual or legal right. Accordingly, the allegations in the complaint,
including the actionable document attached thereto, clearly demonstrates that [petitioner] has
NO valid contractual or legal right which could be violated by the [individual respondents]
herein. As a consequence, [petitioners] complaint does NOT state a valid cause of action
because NOT all the essential elements of a cause of action are present. (Underscoring and
words in bracket added.)
Likewise well-taken are the following complementary excerpts from the CAs equally assailed
Resolution of December 7, 200427 denying petitioners motion for reconsideration:
Further, We conclude that despite glaring defects in the allegations in the complaint as well as
the actionable document attached thereto (Rollo, p. 191), the [trial] court did not appreciate and
apply the legal provisions which were brought to its attention by herein [respondents] in the
their pleadings. In our evaluation of [petitioners] complaint, the latter alleged inter alia to have
contributed immovable properties to the alleged partnership but the actionable document is not
a public document and there was no inventory of immovable properties signed by the parties.
Both the allegations in the complaint and the actionable documents considered, it is crystal clear
that [petitioner] has no valid or legal right which could be violated by [respondents]. (Words in
bracket added.)
Under the second assigned error, it is petitioners posture that Annex "A-1", assuming its
inefficacy or nullity as a partnership document, nevertheless created demandable rights in his
favor. As petitioner succinctly puts it in this petition:

LEGFORMS ALS3C1415 | 23

43. Contrariwise, this actionable document, especially its above-quoted provisions, established
an actionable contract even though it may not be a partnership. This actionable contract is what
is known as an innominate contract (Civil Code, Article 1307).
44. It may not be a contract of loan, or a mortgage or whatever, but surely the contract does
create rights and obligations of the parties and which rights and obligations may be enforceable
and demandable. Just because the relationship created by the agreement cannot be specifically
labeled or pigeonholed into a category of nominate contract does not mean it is void or
unenforceable.
Petitioner has thus thrusted the notion of an innominate contract on this Court - and earlier on
the CA after he experienced a reversal of fortune thereat - as an afterthought. The appellate
court, however, cannot really be faulted for not yielding to petitioners dubious stratagem of
altering his theory of joint venture/partnership to an innominate contract. For, at bottom, the
appellate courts certiorari jurisdiction was circumscribed by what was alleged to have been the
order/s issued by the trial court in grave abuse of discretion. As respondent Yang pointedly
observed,28 since the parties basic position had been well-defined, that of petitioner being that
the actionable document established a partnership/joint venture, it is on those positions that the
appellate court exercised its certiorari jurisdiction. Petitioners act of changing his original
theory is an impermissible practice and constitutes, as the CA aptly declared, an admission of
the untenability of such theory in the first place.
[Petitioner] is now humming a different tune . . . . In a sudden twist of stance, he has now
contended that the actionable instrument may be considered an innominate contract. xxx Verily,
this now changes [petitioners] theory of the case which is not only prohibited by the Rules but
also is an implied admission that the very theory he himself has adopted, filed and
prosecuted before the respondent court is erroneous.
Be that as it may . . We hold that this new theory contravenes [petitioners] theory of the
actionable document being a partnership document. If anything, it is so obvious we do have to
test the sufficiency of the cause of action on the basis of partnership law xxx.29 (Emphasis in the
original; Words in bracket added).
But even assuming in gratia argumenti that Annex "A-1" partakes of a perfected innominate
contract, petitioners complaint would still be dismissible as against Eduardo and, more so,
against Yang. It cannot be over-emphasized that petitioner points to Eduardo as the author of
Annex "A-1". Withal, even on this consideration alone, petitioners claim against Yang is
doomed from the very start.
As it were, the only portion of Annex "A-1" which could perhaps be remotely regarded as
vesting petitioner with a right to demand from respondent Eduardo the observance of a
determinate conduct, reads:
xxx You will be the only one left with the company, among us brothers and I will ask you to stay
as I want you to run this office everytime I am away. I want you to run it the way I am trying to
run it because I will be alone and I will depend entirely to you, My sons will not be ready to
help me yet until about maybe 15/20 years from now. Whatever is left in the corporation, I will
make sure that you get ONE MILLION PESOS (P1,000,000.00) or ten percent (10%) equity,
whichever is greater. (Underscoring added)

It is at once apparent that what respondent Eduardo imposed upon himself under the above
passage, if he indeed wrote Annex "A-1", is a promise which is not to be performed within one
year from "contract" execution on June 22, 1973. Accordingly, the agreement embodied in Annex
"A-1" is covered by the Statute of Frauds and ergo unenforceable for non-compliance
therewith.30 By force of the statute of frauds, an agreement that by its terms is not to be
performed within a year from the making thereof shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be in writing and subscribed by the party charged.
Corollarily, no action can be proved unless the requirement exacted by the statute of frauds is
complied with.31
Lest it be overlooked, petitioner is the intended beneficiary of the P1 Million or 10% equity of
the family businesses supposedly promised by Eduardo to give in the near future. Any
suggestion that the stated amount or the equity component of the promise was intended to go to
a common fund would be to read something not written in Annex "A-1". Thus, even this angle
alone argues against the very idea of a partnership, the creation of which requires two or more
contracting minds mutually agreeing to contribute money, property or industry to a common
fund with the intention of dividing the profits between or among themselves.32
In sum then, the Court rules, as did the CA, that petitioners complaint for specific performance
anchored on an actionable document of partnership which is legally inexistent or void or, at
best, unenforceable does not state a cause of action as against respondent Eduardo and the
corporate defendants. And if no of action can successfully be maintained against respondent
Eduardo because no valid partnership existed between him and petitioner, the Court cannot see
its way clear on how the same action could plausibly prosper against Yang. Surely, Yang could
not have become a partner in, or could not have had any form of business relationship with, an
inexistent partnership.
As may be noted, petitioner has not, in his complaint, provide the logical nexus that would tie
Yang to him as his partner. In fact, attendant circumstances would indicate the contrary.
Consider:
1. Petitioner asserted in his complaint that his so-called joint venture/partnership with Eduardo
was "for the continuation of their family business and common family funds which were
theretofore being mainly managed by Eduardo." 33 But Yang denies kinship with the Litonjua
family and petitioner has not disputed the disclaimer.
2. In some detail, petitioner mentioned what he had contributed to the joint venture/partnership
with Eduardo and what his share in the businesses will be. No allegation is made whatsoever
about what Yang contributed, if any, let alone his proportional share in the profits. But such
allegation cannot, however, be made because, as aptly observed by the CA, the actionable
document did not contain such provision, let alone mention the name of Yang. How, indeed,
could a person be considered a partner when the document purporting to establish the
partnership contract did not even mention his name.
3. Petitioner states in par. 2.01 of the complaint that "[he] and Eduardo are business partners in
the [respondent] corporations," while "Bobby is his and Eduardos partner in their Odeon
Theater investment (par. 2.03). This means that the partnership between petitioner and Eduardo
came first; Yang became their partner in their Odeon Theater investment thereafter. Several
paragraphs later, however, petitioner would contradict himself by alleging that his "investment
and that of Eduardo and Yang in the Odeon theater business has expanded through a
LEGFORMS ALS3C1415 | 24

reinvestment of profit income and direct investments in several corporation including but not
limited to [six] corporate respondents" This simply means that the "Odeon Theatre business"
came before the corporate respondents. Significantly enough, petitioner refers to the corporate
respondents as "progeny" of the Odeon Theatre business.34
Needless to stress, petitioner has not sufficiently established in his complaint the legal vinculum
whence he sourced his right to drag Yang into the fray. The Court of Appeals, in its assailed
decision, captured and formulated the legal situation in the following wise:
[Respondent] Yang, is impleaded because, as alleged in the complaint, he is a "partner" of
[Eduardo] and the [petitioner] in the Odeon Theater Investment which expanded through
reinvestments of profits and direct investments in several corporations, thus:

venture or whatever or some innominate contract It may be noted that one kind of
innominate contract is what is known as du ut facias (I give that you may do).37
43. Contrariwise, this actionable document, especially its above-quoted provisions, established
an actionable contract even though it may not be a partnership. This actionable contract is what
is known as an innominate contract (Civil Code, Article 1307).38
Springing surprises on the opposing party is offensive to the sporting idea of fair play, justice
and due process; hence, the proscription against a party shifting from one theory at the trial
court to a new and different theory in the appellate court.39 On the same rationale, an issue
which was neither averred in the complaint cannot be raised for the first time on appeal.40 It is
not difficult, therefore, to agree with the CA when it made short shrift of petitioners innominate
contract theory on the basis of the foregoing basic reasons.

xxx xxx xxx


Clearly, [petitioners] claim against Yang arose from his alleged partnership with petitioner
and the respondent. However, there was NO allegation in the complaint which directly
alleged how the supposed contractual relation was created between [petitioner] and Yang.
More importantly, however, the foregoing ruling of this Court that the purported partnership
between [Eduardo] is void and legally inexistent directly affects said claim against Yang. Since
[petitioner] is trying to establish his claim against Yang by linking him to the legally
inexistent partnership . . . such attempt had become futile because there was NOTHING that
would contractually connect [petitioner] and Yang. To establish a valid cause of action, the
complaint should have a statement of fact upon which to connect [respondent] Yang to the
alleged partnership between [petitioner] and respondent [Eduardo], including their alleged
investment in the Odeon Theater. A statement of facts on those matters is pivotal to the
complaint as they would constitute the ultimate facts necessary to establish the elements of a
cause of action against Yang. 35
Pressing its point, the CA later stated in its resolution denying petitioners motion for
reconsideration the following:
xxx Whatever the complaint calls it, it is the actionable document attached to the complaint that
is controlling. Suffice it to state, We have not ignored the actionable document As a matter of
fact, We emphasized in our decision that insofar as [Yang] is concerned, he is not even
mentioned in the said actionable document. We are therefore puzzled how a person not
mentioned in a document purporting to establish a partnership could be considered a partner.36
(Words in bracket ours).
The last issue raised by petitioner, referring to whether or not he changed his theory of the case,
as peremptorily determined by the CA, has been discussed at length earlier and need not detain
us long. Suffice it to say that after the CA has ruled that the alleged partnership is inexistent,
petitioner took a different tack. Thus, from a joint venture/partnership theory which he adopted
and consistently pursued in his complaint, petitioner embraced the innominate contract theory.
Illustrative of this shift is petitioners statement in par. #8 of his motion for reconsideration of
the CAs decision combined with what he said in par. # 43 of this petition, as follows:

Petitioners protestation that his act of introducing the concept of innominate contract was not a
case of changing theories but of supporting his pleaded cause of action that of the existence of
a partnership - by another legal perspective/argument, strikes the Court as a strained attempt to
rationalize an untenable position. Paragraph 12 of his motion for reconsideration of the CAs
decision virtually relegates partnership as a fall-back theory. Two paragraphs later, in the same
notion, petitioner faults the appellate court for reading, with myopic eyes, the actionable
document solely as establishing a partnership/joint venture. Verily, the cited paragraphs are a
study of a party hedging on whether or not to pursue the original cause of action or altogether
abandoning the same, thus:
12. Incidentally, assuming that the actionable document created a partnership between
[respondent] Eduardo, Sr. and [petitioner], no immovables were contributed to this partnership.
xxx
14. All told, the Decision takes off from a false premise that the actionable document attached to
the complaint does not establish a contractual relationship between [petitioner] and Eduardo,
Sr. and Roberto T Yang simply because his document does not create a partnership or a joint
venture. This is a myopic reading of the actionable document.
Per the Courts own count, petitioner used in his complaint the mixed words "joint
venture/partnership" nineteen (19) times and the term "partner" four (4) times. He made
reference to the "law of joint venture/partnership [being applicable] to the business relationship
between [him], Eduardo and Bobby [Yang]" and to his "rights in all specific properties of their
joint venture/partnership". Given this consideration, petitioners right of action against
respondents Eduardo and Yang doubtless pivots on the existence of the partnership between the
three of them, as purportedly evidenced by the undated and unsigned Annex "A-1". A void
Annex "A-1", as an actionable document of partnership, would strip petitioner of a cause of
action under the premises. A complaint for delivery and accounting of partnership property
based on such void or legally non-existent actionable document is dismissible for failure to state
of action. So, in gist, said the Court of Appeals. The Court agrees.
WHEREFORE, the instant petition is DENIED and the impugned Decision and Resolution of the
Court of Appeals AFFIRMED.

8. Whether or not the actionable document creates a partnership, joint venture, or whatever, is a
legal matter. What is determinative for purposes of sufficiency of the complainants allegations,
is whether the actionable document bears out an actionable contract be it a partnership, a joint
LEGFORMS ALS3C1415 | 25

NOTARIAL WILL

Respondent opposed her elder sister's petition on the following grounds: the

1.

will was not executed and attested as required by law; its attestation clause and
acknowledgment did not comply with the requirements of the law; the signature of the testatrix
was procured by fraud and petitioner and her children procured the will through undue and
improper pressure and influence.

CIVIL CODE, ARTICLES 805 AND 806

Art. 805. Every will, other than a holographic will, must be subscribed at the end thereof by the
testator himself or by the testator's name written by some other person in his presence, and by
his express direction, and attested and subscribed by three or more credible witnesses in the
presence of the testator and of one another.
The testator or the person requested by him to write his name and the instrumental witnesses of
the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left
margin, and all the pages shall be numbered correlatively in letters placed on the upper part of
each page.
The attestation shall state the number of pages used upon which the will is written, and the fact
that the testator signed the will and every page thereof, or caused some other person to write his
name, under his express direction, in the presence of the instrumental witnesses, and that the
latter witnessed and signed the will and all the pages thereof in the presence of the testator and
of one another.
If the attestation clause is in a language not known to the witnesses, it shall be interpreted to
them. (n)
Art. 806. Every will must be acknowledged before a notary public by the testator and the
witnesses. The notary public shall not be required to retain a copy of the will, or file another
with the Office of the Clerk of Court. (n)

2.

GUERRERO V. BIHIS, G.R. NO. 174144, 17 APRIL 2007

The Scriptures tell the story of the brothers Jacob and Esau[1], siblings who fought bitterly over
the inheritance of their father Isaac's estate. Jurisprudence is also replete with cases involving
acrimonious conflicts between brothers and sisters over successional rights. This case is no
exception.
On February 19, 1994, Felisa Tamio de Buenaventura, mother of petitioner Bella A. Guerrero and
respondent Resurreccion A. Bihis, died at the Metropolitan Hospital in Tondo, Manila.
On May 24, 1994, petitioner filed a petition for the probate of the last will and testament of the
decedent in Branch 95[2] of the Regional Trial Court of Quezon City where the case was
docketed as Sp. Proc. No. Q-94-20661.
The petition alleged the following: petitioner was named as executrix in the decedent's will and
she was legally qualified to act as such; the decedent was a citizen of the Philippines at the time
of her death; at the time of the execution of the will, the testatrix was 79 years old, of sound and
disposing mind, not acting under duress, fraud or undue influence and was capacitated to
dispose of her estate by will.

In an order dated November 9, 1994, the trial court appointed petitioner as special
administratrix of the decedent's estate. Respondent opposed petitioner's appointment but
subsequently withdrew her opposition. Petitioner took her oath as temporary special
administratrix and letters of special administration were issued to her.
On January 17, 2000, after petitioner presented her evidence, respondent filed a demurrer
thereto alleging that petitioner's evidence failed to establish that the decedent's will complied
with Articles 804 and 805 of the Civil Code.
In a resolution dated July 6, 2001, the trial court denied the probate of the will ruling that Article
806 of the Civil Code was not complied with because the will was "acknowledged" by the
testatrix and the witnesses at the testatrix's, residence at No. 40 Kanlaon Street, Quezon City
before Atty. Macario O. Directo who was a commissioned notary public for and in Caloocan
City. The dispositive portion of the resolution read:
WHEREFORE, in view of the foregoing, the Court finds, and so declares that it cannot admit the
last will and testament of the late Felisa Tamio de Buenaventura to probate for the reasons
hereinabove discussed and also in accordance with Article 839 [of the Civil Code] which
provides that if the formalities required by law have not been complied with, the will shall be
disallowed. In view thereof, the Court shall henceforth proceed with intestate succession in
regard to the estate of the deceased Felisa Tamio de Buenaventura in accordance with Article
960 of the [Civil Code], to wit: "Art. 960. Legal or intestate succession takes place: (1) If a person
dies without a will, or with a void will, or one which has subsequently lost its validity, xxx."
SO ORDERED.[3]
Petitioner elevated the case to the Court of Appeals but the appellate court dismissed the appeal
and affirmed the resolution of the trial court.[4]
Thus, this petition.[5]
Petitioner admits that the will was acknowledged by the testatrix and the witnesses at the
testatrix's residence in Quezon City before Atty. Directo and that, at that time, Atty. Directo was
a commissioned notary public for and in Caloocan City. She, however, asserts that the fact that
the notary public was acting outside his territorial jurisdiction did not affect the validity of the
notarial will.
Did the will "acknowledged" by the testatrix and the instrumental witnesses before a notary
public acting outside the place of his commission satisfy the requirement under Article 806 of
the Civil Code? It did not.
Article 806 of the Civil Code provides:

LEGFORMS ALS3C1415 | 26

ART. 806. Every will must be acknowledged before a notary public by the testator and the
witnesses. The notary public shall not be required to retain a copy of the will, or file another
with the office of the Clerk of Court.
One of the formalities required by law in connection with the execution of a notarial will is that
it must be acknowledged before a notary public by the testator and the witnesses.[6] This formal
requirement is one of the indispensable requisites for the validity of a will.[7] In other words, a
notarial will that is not acknowledged before a notary public by the testator and the
instrumental witnesses is void and cannot be accepted for probate.
An acknowledgment is the act of one who has executed a deed in going before some competent
officer and declaring it to be his act or deed.[8] In the case of a notarial will, that competent
officer is the notary public.
The acknowledgment of a notarial will coerces the testator and the instrumental witnesses to
declare before an officer of the law, the notary public, that they executed and subscribed to the
will as their own free act or deed.[9] Such declaration is under oath and under pain of perjury,
thus paving the way for the criminal prosecution of persons who participate in the execution of
spurious wills, or those executed without the free consent of the testator.[10] It also provides a
further degree of assurance that the testator is of a certain mindset in making the testamentary
dispositions to the persons instituted as heirs or designated as devisees or legatees in the
will.[11]
Acknowledgment can only be made before a competent officer, that is, a lawyer duly
commissioned as a notary public.
In this connection, the relevant provisions of the Notarial Law provide:

public. Any notarial act outside the limits of his jurisdiction has no force and effect. As this
Court categorically pronounced in Tecson v. Tecson:[14]
An acknowledgment taken outside the territorial limits of the officer's jurisdiction is void as if
the person taking it ware wholly without official character. (emphasis supplied)
Since Atty. Directo was not a commissioned notary public for and in Quezon City, he lacked the
authority to take the acknowledgment of the testatrix and the instrumental witnesses. In the
same vein, the testatrix and her witnesses could not have validly acknowledged the will before
him. Thus, Felisa Tamio de Buenaventura's last will and testament was, in effect, not
acknowledged as required by law.
Moreover, Article 5 of the Civil Code provides:

ART. 5. Acts executed against the provisions of mandatory or prohibitory laws shall be void,
except when the law itself authorizes
their validity.
The violation of a mandatory or a prohibitory statute renders the act illegal and void unless the
law itself declares its continuing validity. Here, mandatory and prohibitory statutes were
transgressed in the execution of the alleged "acknowledgment." The compulsory language of
Article 806 of the Civil Code was not complied with and the interdiction of Article 240 of the
Notarial Law was breached. Ineluctably, the acts of the testatrix, her witnesses and Atty. Directo
were all completely void.

GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PROVINCE OF

The Court cannot turn a blind eye to Atty. Directo's participation in the preparation, execution
and unlawful "acknowledgment" of Felisa Tamio de Buenaventura's will. Had he exercised his
notarial commission properly, the intent of the law to effectuate the decedent's final
statements[15] as expressed in her will would not have come to naught.[16] Hence, Atty. Directo
should show cause why he should not be administratively sanctioned as a member of the bar
and as an officer of the court.

This is to certify that


, of the municipality of
in
said
province, was on the
day of
, anno Domini nineteen hundred and
_______, appointed by me a notary public, within and for the said province, for the term ending
on the first day of January, anno Domini nineteen hundred and
.

WHEREFORE, the petition is hereby DENIED. Costs against petitioner.


Let a copy of this decision be furnished the Commission on Bar Discipline of the Integrated Bar
of the Philippines for investigation, report and recommendation on the possible misconduct of
Atty. Macario O. Directo.

SECTION 237. Form of commission for notary public. -The appointment of a notary public shall
be in writing, signed by the judge, and substantially in the following form:

Judge of the Court of irst Instance[12] of said Province


xxx xxx xxx
SECTION 240. Territorial jurisdiction. - The jurisdiction of a notary public in a province shall be
co-extensive with the province. The jurisdiction of a notary public in the City of Manila shall be
co- extensive with said city. No notary shall possess authority to do any notarial act beyond the
limits of his jurisdiction. (emphases supplied)
A notary public's commission is the grant of authority in his favor to perform notarial acts.[13] It
is issued "within and for" a particular territorial jurisdiction and the notary public's authority is
co-extensive with it. In other words, a notary public is authorized to perform notarial acts,
including the taking of acknowledgments, within that territorial jurisdiction only. Outside the
place of his commission, he is bereft of power to perform any notarial act; he is not a notary
LEGFORMS ALS3C1415 | 27

3.

AZUELA V. COURT OF APPEALS, G.R. NO. 122880, 12 APRIL 2006

The core of this petition is a highly defective notarial will, purportedly executed by Eugenia E.
Igsolo (decedent), who died on 16 December 1982 at the age of 80. In refusing to give legal
recognition to the due execution of this document, the Court is provided the opportunity to
assert a few important doctrinal rules in the execution of notarial wills, all self-evident in view of
Articles 805 and 806 of the Civil Code.
A will whose attestation clause does not contain the number of pages on which the will is
written is fatally defective. A will whose attestation clause is not signed by the instrumental
witnesses is fatally defective. And perhaps most importantly, a will which does not contain an
acknowledgment, but a mere jurat, is fatally defective. Any one of these defects is sufficient to
deny probate. A notarial will with all three defects is just aching for judicial rejection.
There is a distinct and consequential reason the Civil Code provides a comprehensive catalog of
imperatives for the proper execution of a notarial will. Full and faithful compliance with all the
detailed requisites under Article 805 of the Code leave little room for doubt as to the validity in
the due execution of the notarial will. Article 806 likewise imposes another safeguard to the
validity of notarial wills that they be acknowledged before a notary public by the testator and
the witnesses. A notarial will executed with indifference to these two codal provisions opens
itself to nagging questions as to its legitimacy.
The case stems from a petition for probate filed on 10 April 1984 with the Regional Trial Court
(RTC) of Manila. The petition filed by petitioner Felix Azuela sought to admit to probate the
notarial will of Eugenia E. Igsolo, which was notarized on 10 June 1981. Petitioner is the son of
the cousin of the decedent.
The will, consisting of two (2) pages and written in the vernacular Pilipino, read in full:
HULING HABILIN NI EUGENIA E. IGSOLO

Pangatlo- Na ninunumbrahan ko si VART PAGUE na siyang nagpapatupad ng huling habiling


ito at kagustuhan ko rin na hindi na kailanman siyang mag-lagak ng piyansiya.
Aking nilagdaan ang Huling Habilin na ito dito sa Maynila ika 10 ng Hunyo, 1981.
(Sgd.)
EUGENIA E. IGSOLO
(Tagapagmana)
PATUNAY NG MGA SAKSI
Ang kasulatang ito, na binubuo ng ____ dahon pati ang huling dahong ito, na ipinahayag sa
amin ni Eugenia E. Igsolo, tagapagmana na siya niyang Huling Habilin, ngayon ika-10 ng
Hunyo 1981, ay nilagdaan ng nasabing tagapagmana sa ilalim ng kasulatang nabanggit at sa
kaliwang panig ng lahat at bawat dahon, sa harap ng lahat at bawat sa amin, at kami namang
mga saksi ay lumagda sa harap ng nasabing tagapagmana at sa harap ng lahat at bawat isa sa
amin, sa ilalim ng nasabing kasulatan at sa kaliwang panig ng lahat at bawat dahon ng
kasulatan ito.
Nilagdaan ko at ninotario ko ngayong 10 ng Hunyo 10, 1981 dito sa Lungsod ng Maynila.
(Sgd.)
PETRONIO Y. BAUTISTA
Doc. No. 1232 ; NOTARIO PUBLIKO
Page No. 86 ; Until Dec. 31, 1981
Book No. 43 ; PTR-152041-1/2/81-Manila
Series of 1981 TAN # 1437-977-81
The three named witnesses to the will affixed their signatures on the left-hand margin of both
pages of the will, but not at the bottom of the attestation clause.

SA NGALAN NG MAYKAPAL, AMEN:


AKO, si EUGENIA E. IGSOLO, nakatira sa 500 San Diego St., Sampaloc, Manila, pitongput
siyam (79) na gulang, nasa hustong pagi-isip, pag-unawa at memoria ay nag-hahayag na ito na
ang aking huling habilin at testamento, at binabali wala ko lahat ang naunang ginawang habilin
o testamento:
Una-Hinihiling ko na ako ay mailibing sa Sementerio del Norte, La Loma sang-ayong sa
kaugalian at patakaran ng simbahang katoliko at ang taga-pag-ingat (Executor) ng habiling ito
ay magtatayo ng bantayog upang silbing ala-ala sa akin ng aking pamilya at kaibigan;
Pangalawa-Aking ipinagkakaloob at isinasalin ang lahat ng karapatan sa aking pamangkin na si
Felix Azuela, na siyang nag-alaga sa akin sa mahabang panahon, yaong mga bahay na nakatirik
sa lote numero 28, Block 24 at nakapangalan sa Pechaten Korporasyon, ganoon din ibinibigay ko
ang lahat ng karapatan sa bahay na nakatirik sa inoopahan kong lote, numero 43, Block 24 na
pag-aari ng Pechaten Corporation. Ipinagkakaloob kong buong buo ang lahat ng karapatan sa
bahay at lupa na nasa 500 San Diego St., Lot 42, Block 24, Sampaloc, Manila kay Felix Azuela at
ang pagkakaloob kong ito ay walang pasubalit at kondiciones;

The probate petition adverted to only two (2) heirs, legatees and devisees of the decedent,
namely: petitioner himself, and one Irene Lynn Igsolo, who was alleged to have resided abroad.
Petitioner prayed that the will be allowed, and that letters testamentary be issued to the
designated executor, Vart Prague.
The petition was opposed by Geralda Aida Castillo (Geralda Castillo), who represented herself
as the attorney-in-fact of "the 12 legitimate heirs" of the decedent.2 Geralda Castillo claimed that
the will is a forgery, and that the true purpose of its emergence was so it could be utilized as a
defense in several court cases filed by oppositor against petitioner, particularly for forcible entry
and usurpation of real property, all centering on petitioners right to occupy the properties of
the decedent.3 It also asserted that contrary to the representations of petitioner, the decedent
was actually survived by 12 legitimate heirs, namely her grandchildren, who were then residing
abroad. Per records, it was subsequently alleged that decedent was the widow of Bonifacio
Igsolo, who died in 1965,4 and the mother of a legitimate child, Asuncion E. Igsolo, who
predeceased her mother by three (3) months.5
Oppositor Geralda Castillo also argued that the will was not executed and attested to in
accordance with law. She pointed out that decedents signature did not appear on the second
LEGFORMS ALS3C1415 | 28

page of the will, and the will was not properly acknowledged. These twin arguments are among
the central matters to this petition.
After due trial, the RTC admitted the will to probate, in an Order dated 10 August 1992.6 The
RTC favorably took into account the testimony of the three (3) witnesses to the will, Quirino
Agrava, Lamberto Leano, and Juanito Estrada. The RTC also called to fore "the modern
tendency in respect to the formalities in the execution of a will x x x with the end in view of
giving the testator more freedom in expressing his last wishes;"7 and from this perspective,
rebutted oppositors arguments that the will was not properly executed and attested to in
accordance with law.

As regards the oppositors assertion that the signature of the testatrix on the will is a forgery, the
testimonies of the three subscribing witnesses to the will are convincing enough to establish the
genuineness of the signature of the testatrix and the due execution of the will.8
The Order was appealed to the Court of Appeals by Ernesto Castillo, who had substituted his
since deceased mother-in-law, Geralda Castillo. In a Decision dated 17 August 1995, the Court of
Appeals reversed the trial court and ordered the dismissal of the petition for probate.9 The
Court of Appeals noted that the attestation clause failed to state the number of pages used in the
will, thus rendering the will void and undeserving of probate.10
Hence, the present petition.

After a careful examination of the will and consideration of the testimonies of the subscribing
and attesting witnesses, and having in mind the modern tendency in respect to the formalities in
the execution of a will, i.e., the liberalization of the interpretation of the law on the formal
requirements of a will with the end in view of giving the testator more freedom in expressing his
last wishes, this Court is persuaded to rule that the will in question is authentic and had been
executed by the testatrix in accordance with law.
On the issue of lack of acknowledgement, this Court has noted that at the end of the will after
the signature of the testatrix, the following statement is made under the sub-title, "Patunay Ng
Mga Saksi":
"Ang kasulatang ito, na binubuo ng _____ dahon pati ang huling dahong ito, na ipinahayag sa
amin ni Eugenia N. Igsolo, tagapagmana na siya niyang Huling Habilin, ngayong ika-10 ng
Hunyo 1981, ay nilagdaan ng nasabing tagapagmana sa ilalim ng kasulatang nabanggit at sa
kaliwang panig ng lahat at bawat dahon, sa harap ng lahat at bawat sa amin, at kami namang
mga saksi ay lumagda sa harap ng nasabing tagapagmana at sa harap ng lahat at bawat isa sa
amin, sa ilalim ng nasabing kasulatan at sa kaliwang panig ng lahat at bawat dahon ng
kasulatan ito."
The aforequoted declaration comprises the attestation clause and the acknowledgement and is
considered by this Court as a substantial compliance with the requirements of the law.
On the oppositors contention that the attestation clause was not signed by the subscribing
witnesses at the bottom thereof, this Court is of the view that the signing by the subscribing
witnesses on the left margin of the second page of the will containing the attestation clause and
acknowledgment, instead of at the bottom thereof, substantially satisfies the purpose of
identification and attestation of the will.
With regard to the oppositors argument that the will was not numbered correlatively in letters
placed on upper part of each page and that the attestation did not state the number of pages
thereof, it is worthy to note that the will is composed of only two pages. The first page contains
the entire text of the testamentary dispositions, and the second page contains the last portion of
the attestation clause and acknowledgement. Such being so, the defects are not of a serious
nature as to invalidate the will. For the same reason, the failure of the testatrix to affix her
signature on the left margin of the second page, which contains only the last portion of the
attestation clause and acknowledgment is not a fatal defect.

Petitioner argues that the requirement under Article 805 of the Civil Code that "the number of
pages used in a notarial will be stated in the attestation clause" is merely directory, rather than
mandatory, and thus susceptible to what he termed as "the substantial compliance rule."11
The solution to this case calls for the application of Articles 805 and 806 of the Civil Code, which
we replicate in full.
Art. 805. Every will, other than a holographic will, must be subscribed at the end thereof by the
testator himself or by the testator's name written by some other person in his presence, and by
his express direction, and attested and subscribed by three or more credible witnesses in the
presence of the testator and of one another.
The testator or the person requested by him to write his name and the instrumental witnesses of
the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left
margin, and all the pages shall be numbered correlatively in letters placed on the upper part of
each page.
The attestation shall state the number of pages used upon which the will is written, and the fact
that the testator signed the will and every page thereof, or caused some other person to write his
name, under his express direction, in the presence of the instrumental witnesses, and that the
latter witnessed and signed the will and all the pages thereof in the presence of the testator and
of one another.
If the attestation clause is in a language not known to the witnesses, it shall be interpreted to
them.
Art. 806. Every will must be acknowledged before a notary public by the testator and the
witnesses. The notary public shall not be required to retain a copy of the will, or file another
with the office of the Clerk of Court.
The appellate court, in its Decision, considered only one defect, the failure of the attestation
clause to state the number of pages of the will. But an examination of the will itself reveals
several more deficiencies.
As admitted by petitioner himself, the attestation clause fails to state the number of pages of the
will.12 There was an incomplete attempt to comply with this requisite, a space having been
allotted for the insertion of the number of pages in the attestation clause. Yet the blank was
never filled in; hence, the requisite was left uncomplied with.
LEGFORMS ALS3C1415 | 29

The Court of Appeals pounced on this defect in reversing the trial court, citing in the process Uy
Coque v. Navas L. Sioca13 and In re: Will of Andrada.14 In Uy Coque, the Court noted that
among the defects of the will in question was the failure of the attestation clause to state the
number of pages contained in the will.15 In ruling that the will could not be admitted to
probate, the Court made the following consideration which remains highly relevant to this day:
"The purpose of requiring the number of sheets to be stated in the attestation clause is obvious;
the document might easily be so prepared that the removal of a sheet would completely change
the testamentary dispositions of the will and in the absence of a statement of the total number of
sheets such removal might be effected by taking out the sheet and changing the numbers at the
top of the following sheets or pages. If, on the other hand, the total number of sheets is stated in
the attestation clause the falsification of the document will involve the inserting of new pages
and the forging of the signatures of the testator and witnesses in the margin, a matter attended
with much greater difficulty."16

pages composing the will and that if this is missing or is omitted, it will have the effect of
invalidating the will if the deficiency cannot be supplied, not by evidence aliunde, but by a
consideration or examination of the will itself. But here the situation is different. While the
attestation clause does not state the number of sheets or pages upon which the will is written,
however, the last part of the body of the will contains a statement that it is composed of eight
pages, which circumstance in our opinion takes this case out of the rigid rule of construction and
places it within the realm of similar cases where a broad and more liberal view has been
adopted to prevent the will of the testator from being defeated by purely technical
considerations." (page 165-165, supra) (Underscoring supplied)
In "Apolonio Tabaoda versus Hon. Avelino Rosal, et al." supra, the notarial acknowledgement in
the Will states the number of pages used in the:
"x x x

The case of In re Will of Andrada concerned a will the attestation clause of which failed to state
the number of sheets or pages used. This consideration alone was sufficient for the Court to
declare "unanim[ity] upon the point that the defect pointed out in the attesting clause is fatal."17
It was further observed that "it cannot be denied that the x x x requirement affords additional
security against the danger that the will may be tampered with; and as the Legislature has seen
fit to prescribe this requirement, it must be considered material."18
Against these cited cases, petitioner cites Singson v. Florentino19 and Taboada v. Hon. Rosal,20
wherein the Court allowed probate to the wills concerned therein despite the fact that the
attestation clause did not state the number of pages of the will. Yet the appellate court itself
considered the import of these two cases, and made the following distinction which petitioner is
unable to rebut, and which we adopt with approval:
Even a cursory examination of the Will (Exhibit "D"), will readily show that the attestation does
not state the number of pages used upon which the will is written. Hence, the Will is void and
undeserving of probate.
We are not impervious of the Decisions of the Supreme Court in "Manuel Singson versus Emilia
Florentino, et al., 92 Phil. 161 and Apolonio [Taboada] versus Hon. Avelino Rosal, et al., 118
SCRA 195," to the effect that a will may still be valid even if the attestation does not contain the
number of pages used upon which the Will is written. However, the Decisions of the Supreme
Court are not applicable in the aforementioned appeal at bench. This is so because, in the case of
"Manuel Singson versus Emilia Florentino, et al., supra," although the attestation in the subject
Will did not state the number of pages used in the will, however, the same was found in the last
part of the body of the Will:
"x x x
The law referred to is article 618 of the Code of Civil Procedure, as amended by Act No. 2645,
which requires that the attestation clause shall state the number of pages or sheets upon which
the will is written, which requirement has been held to be mandatory as an effective safeguard
against the possibility of interpolation or omission of some of the pages of the will to the
prejudice of the heirs to whom the property is intended to be bequeathed (In re Will of Andrada,
42 Phil. 180; Uy Coque vs. Navas L. Sioca, 43 Phil., 405; Gumban vs. Gorcho, 50 Phil. 30; Quinto
vs. Morata, 54 Phil. 481; Echevarria vs. Sarmiento, 66 Phil. 611). The ratio decidendi of these
cases seems to be that the attestation clause must contain a statement of the number of sheets or

We have examined the will in question and noticed that the attestation clause failed to state the
number of pages used in writing the will. This would have been a fatal defect were it not for the
fact that, in this case, it is discernible from the entire will that it is really and actually composed
of only two pages duly signed by the testatrix and her instrumental witnesses. As earlier stated,
the first page which contains the entirety of the testamentary dispositions is signed by the
testatrix at the end or at the bottom while the instrumental witnesses signed at the left margin.
The other page which is marked as "Pagina dos" comprises the attestation clause and the
acknowledgment. The acknowledgment itself states that "this Last Will and Testament consists
of two pages including this page" (pages 200-201, supra) (Underscoring supplied).
However, in the appeal at bench, the number of pages used in the will is not stated in any part
of the Will. The will does not even contain any notarial acknowledgment wherein the number of
pages of the will should be stated.21
Both Uy Coque and Andrada were decided prior to the enactment of the Civil Code in 1950, at a
time when the statutory provision governing the formal requirement of wills was Section
618 of the Code of Civil Procedure.22 Reliance on these cases remains apropos, considering that
the requirement that the attestation state the number of pages of the will is extant from Section
618.23 However, the enactment of the Civil Code in 1950 did put in force a rule of interpretation
of the requirements of wills, at least insofar as the attestation clause is concerned, that may vary
from the philosophy that governed these two cases. Article 809 of the Civil Code states: "In the
absence of bad faith, forgery, or fraud, or undue and improper pressure and influence, defects
and imperfections in the form of attestation or in the language used therein shall not render the
will invalid if it is proved that the will was in fact executed and attested in substantial
compliance with all the requirements of article 805."
In the same vein, petitioner cites the report of the Civil Code Commission, which stated that "the
underlying and fundamental objective permeating the provisions on the [law] on [wills] in this
project consists in the [liberalization] of the manner of their execution with the end in view of
giving the testator more [freedom] in [expressing] his last wishes. This objective is in accord
with the [modern tendency] in respect to the formalities in the execution of wills."24 However,
petitioner conveniently omits the qualification offered by the Code Commission in the very
same paragraph he cites from their report, that such liberalization be "but with sufficient

LEGFORMS ALS3C1415 | 30

safeguards and restrictions to prevent the commission of fraud and the exercise of undue and
improper pressure and influence upon the testator."25
Caneda v. Court of Appeals26 features an extensive discussion made by Justice Regalado,
speaking for the Court on the conflicting views on the manner of interpretation of the legal
formalities required in the execution of the attestation clause in wills.27 Uy Coque and Andrada
are cited therein, along with several other cases, as examples of the application of the rule of
strict construction.28 However, the Code Commission opted to recommend a more liberal
construction through the "substantial compliance rule" under Article 809. A cautionary note was
struck though by Justice J.B.L. Reyes as to how Article 809 should be applied:
x x x The rule must be limited to disregarding those defects that can be supplied by an
examination of the will itself: whether all the pages are consecutively numbered; whether the
signatures appear in each and every page; whether the subscribing witnesses are three or the
will was notarized. All these are facts that the will itself can reveal, and defects or even
omissions concerning them in the attestation clause can be safely disregarded. But the total
number of pages, and whether all persons required to sign did so in the presence of each other
must substantially appear in the attestation clause, being the only check against perjury in the
probate proceedings.29 (Emphasis supplied.)
The Court of Appeals did cite these comments by Justice J.B.L. Reyes in its assailed decision,
considering that the failure to state the number of pages of the will in the attestation clause is
one of the defects which cannot be simply disregarded. In Caneda itself, the Court refused to
allow the probate of a will whose attestation clause failed to state that the witnesses subscribed
their respective signatures to the will in the presence of the testator and of each other,30 the
other omission cited by Justice J.B.L. Reyes which to his estimation cannot be lightly
disregarded.

At the same time, Article 809 should not deviate from the need to comply with the formal
requirements as enumerated under Article 805. Whatever the inclinations of the members of the
Code Commission in incorporating Article 805, the fact remains that they saw fit to prescribe
substantially the same formal requisites as enumerated in Section 618 of the Code of Civil
Procedure, convinced that these remained effective safeguards against the forgery or
intercalation of notarial wills.34 Compliance with these requirements, however picayune in
impression, affords the public a high degree of comfort that the testator himself or herself had
decided to convey property post mortem in the manner established in the will.35 The
transcendent legislative intent, even as expressed in the cited comments of the Code
Commission, is for the fruition of the testators incontestable desires, and not for the indulgent
admission of wills to probate.
The Court could thus end here and affirm the Court of Appeals. However, an examination of the
will itself reveals a couple of even more critical defects that should necessarily lead to its
rejection.
For one, the attestation clause was not signed by the instrumental witnesses. While the
signatures of the instrumental witnesses appear on the left-hand margin of the will, they do not
appear at the bottom of the attestation clause which after all consists of their averments before
the notary public.
Cagro v. Cagro36 is material on this point. As in this case, "the signatures of the three witnesses
to the will do not appear at the bottom of the attestation clause, although the page containing
the same is signed by the witnesses on the left-hand margin."37 While three (3) Justices38
considered the signature requirement had been substantially complied with, a majority of six
(6), speaking through Chief Justice Paras, ruled that the attestation clause had not been duly
signed, rendering the will fatally defective.

Caneda suggested: "[I]t may thus be stated that the rule, as it now stands, is that omission which
can be supplied by an examination of the will itself, without the need of resorting to extrinsic
evidence, will not be fatal and, correspondingly, would not obstruct the allowance to probate of
the will being assailed. However, those omissions which cannot be supplied except by evidence
aliunde would result in the invalidation of the attestation clause and ultimately, of the will
itself."31 Thus, a failure by the attestation clause to state that the testator signed every page can
be liberally construed, since that fact can be checked by a visual examination; while a failure by
the attestation clause to state that the witnesses signed in one anothers presence should be
considered a fatal flaw since the attestation is the only textual guarantee of compliance.32

There is no question that the signatures of the three witnesses to the will do not appear at the
bottom of the attestation clause, although the page containing the same is signed by the
witnesses on the left-hand margin.

The failure of the attestation clause to state the number of pages on which the will was written
remains a fatal flaw, despite Article 809. The purpose of the law in requiring the clause to state
the number of pages on which the will is written is to safeguard against possible interpolation or
omission of one or some of its pages and to prevent any increase or decrease in the pages.33 The
failure to state the number of pages equates with the absence of an averment on the part of the
instrumental witnesses as to how many pages consisted the will, the execution of which they
had ostensibly just witnessed and subscribed to. Following Caneda, there is substantial
compliance with this requirement if the will states elsewhere in it how many pages it is
comprised of, as was the situation in Singson and Taboada. However, in this case, there could
have been no substantial compliance with the requirements under Article 805 since there is no
statement in the attestation clause or anywhere in the will itself as to the number of pages which
comprise the will.

The petitioner and appellee contends that signatures of the three witnesses on the left-hand
margin conform substantially to the law and may be deemed as their signatures to the
attestation clause. This is untenable, because said signatures are in compliance with the legal
mandate that the will be signed on the left-hand margin of all its pages. If an attestation clause
not signed by the three witnesses at the bottom thereof, be admitted as sufficient, it would be
easy to add such clause to a will on a subsequent occasion and in the absence of the testator and
any or all of the witnesses.39

We are of the opinion that the position taken by the appellant is correct. The attestation clause is
"a memorandum of the facts attending the execution of the will" required by law to be made by
the attesting witnesses, and it must necessarily bear their signatures. An unsigned attestation
clause cannot be considered as an act of the witnesses, since the omission of their signatures at
the bottom thereof negatives their participation.

The Court today reiterates the continued efficacy of Cagro. Article 805 particularly segregates
the requirement that the instrumental witnesses sign each page of the will, from the requisite
that the will be "attested and subscribed by [the instrumental witnesses]." The respective intents
behind these two classes of signature are distinct from each other. The signatures on the leftLEGFORMS ALS3C1415 | 31

hand corner of every page signify, among others, that the witnesses are aware that the page they
are signing forms part of the will. On the other hand, the signatures to the attestation clause
establish that the witnesses are referring to the statements contained in the attestation clause
itself. Indeed, the attestation clause is separate and apart from the disposition of the will. An
unsigned attestation clause results in an unattested will. Even if the instrumental witnesses
signed the left-hand margin of the page containing the unsigned attestation clause, such
signatures cannot demonstrate these witnesses undertakings in the clause, since the signatures
that do appear on the page were directed towards a wholly different avowal.
The Court may be more charitably disposed had the witnesses in this case signed the attestation
clause itself, but not the left-hand margin of the page containing such clause. Without
diminishing the value of the instrumental witnesses signatures on each and every page, the fact
must be noted that it is the attestation clause which contains the utterances reduced into writing
of the testamentary witnesses themselves. It is the witnesses, and not the testator, who are
required under Article 805 to state the number of pages used upon which the will is written; the
fact that the testator had signed the will and every page thereof; and that they witnessed and
signed the will and all the pages thereof in the presence of the testator and of one another. The
only proof in the will that the witnesses have stated these elemental facts would be their
signatures on the attestation clause.
Thus, the subject will cannot be considered to have been validly attested to by the instrumental
witnesses, as they failed to sign the attestation clause.
Yet, there is another fatal defect to the will on which the denial of this petition should also hinge.
The requirement under Article 806 that "every will must be acknowledged before a notary
public by the testator and the witnesses" has also not been complied with. The importance of
this requirement is highlighted by the fact that it had been segregated from the other
requirements under Article 805 and entrusted into a separate provision, Article 806. The nonobservance of Article 806 in this case is equally as critical as the other cited flaws in compliance
with Article 805, and should be treated as of equivalent import.
In lieu of an acknowledgment, the notary public, Petronio Y. Bautista, wrote "Nilagdaan ko at
ninotario ko ngayong 10 ng Hunyo 10 (sic), 1981 dito sa Lungsod ng Maynila."40 By no manner
of contemplation can those words be construed as an acknowledgment. An acknowledgment is
the act of one who has executed a deed in going before some competent officer or court and
declaring it to be his act or deed.41 It involves an extra step undertaken whereby the signor
actually declares to the notary that the executor of a document has attested to the notary that the
same is his/her own free act and deed.

"acknowledged", and not merely subscribed and sworn to. The will does not present any textual
proof, much less one under oath, that the decedent and the instrumental witnesses executed or
signed the will as their own free act or deed. The acknowledgment made in a will provides for
another all-important legal safeguard against spurious wills or those made beyond the free
consent of the testator. An acknowledgement is not an empty meaningless act.43 The
acknowledgment coerces the testator and the instrumental witnesses to declare before an officer
of the law that they had executed and subscribed to the will as their own free act or deed. Such
declaration is under oath and under pain of perjury, thus allowing for the criminal prosecution
of persons who participate in the execution of spurious wills, or those executed without the free
consent of the testator. It also provides a further degree of assurance that the testator is of certain
mindset in making the testamentary dispositions to those persons he/she had designated in the
will.
It may not have been said before, but we can assert the rule, self-evident as it is under Article
806. A notarial will that is not acknowledged before a notary public by the testator and the
witnesses is fatally defective, even if it is subscribed and sworn to before a notary public.
There are two other requirements under Article 805 which were not fully satisfied by the will in
question. We need not discuss them at length, as they are no longer material to the
disposition of this case. The provision requires that the testator and the instrumental witnesses
sign each and every page of the will on the left margin, except the last; and that all the pages
shall be numbered correlatively in letters placed on the upper part of each page. In this case, the
decedent, unlike the witnesses, failed to sign both pages of the will on the left margin, her only
signature appearing at the so-called "logical end"44 of the will on its first page. Also, the will
itself is not numbered correlatively in letters on each page, but instead numbered with Arabic
numerals. There is a line of thought that has disabused the notion that these two requirements
be construed as mandatory.45 Taken in isolation, these omissions, by themselves, may not be
sufficient to deny probate to a will. Yet even as these omissions are not decisive to the
adjudication of this case, they need not be dwelt on, though indicative as they may be of a
general lack of due regard for the requirements under Article 805 by whoever executed the will.
All told, the string of mortal defects which the will in question suffers from makes the probate
denial inexorable.
WHEREFORE, the petition is DENIED. Costs against petitioner.

It might be possible to construe the averment as a jurat, even though it does not hew to the usual
language thereof. A jurat is that part of an affidavit where the notary certifies that before
him/her, the document was subscribed and sworn to by the executor.42 Ordinarily, the
language of the jurat should avow that the document was subscribed and sworn before the
notary public, while in this case, the notary public averred that he himself "signed and
notarized" the document. Possibly though, the word "ninotario" or "notarized" encompasses the
signing of and swearing in of the executors of the document, which in this case would involve
the decedent and the instrumental witnesses.
Yet even if we consider what was affixed by the notary public as a jurat, the will would
nonetheless remain invalid, as the express requirement of Article 806 is that the will be
LEGFORMS ALS3C1415 | 32

4.

LEE V. TAMBAGO, A.C. NO. 5281, FEBRUARY 12, 2008

In a letter-complaint dated April 10, 2000, complainant Manuel L. Lee charged respondent Atty.
Regino B. Tambago with violation of the Notarial Law and the ethics of the legal profession for
notarizing a spurious last will and testament.
In his complaint, complainant averred that his father, the decedent Vicente Lee, Sr., never
executed the contested will. Furthermore, the spurious will contained the forged signatures of
Cayetano Noynay and Loreto Grajo, the purported witnesses to its execution.
In the said will, the decedent supposedly bequeathed his entire estate to his wife Lim Hock Lee,
save for a parcel of land which he devised to Vicente Lee, Jr. and Elena Lee, half-siblings of
complainant.
The will was purportedly executed and acknowledged before respondent on June 30, 1965.1
Complainant, however, pointed out that the residence certificate2 of the testator noted in the
acknowledgment of the will was dated January 5, 1962.3 Furthermore, the signature of the
testator was not the same as his signature as donor in a deed of donation4 (containing his
purported genuine signature). Complainant averred that the signatures of his deceased father in
the will and in the deed of donation were "in any way (sic) entirely and diametrically opposed
from (sic) one another in all angle[s]."5
Complainant also questioned the absence of notation of the residence certificates of the
purported witnesses Noynay and Grajo. He alleged that their signatures had likewise been
forged and merely copied from their respective voters affidavits.
Complainant further asserted that no copy of such purported will was on file in the archives
division of the Records Management and Archives Office of the National Commission for
Culture and the Arts (NCCA). In this connection, the certification of the chief of the archives
division dated September 19, 1999 stated:
Doc. 14, Page No. 4, Book No. 1, Series of 1965 refers to an AFFIDAVIT executed by
BARTOLOME RAMIREZ on June 30, 1965 and is available in this Office[s] files.6
Respondent in his comment dated July 6, 2001 claimed that the complaint against him contained
false allegations: (1) that complainant was a son of the decedent Vicente Lee, Sr. and (2) that the
will in question was fake and spurious. He alleged that complainant was "not a legitimate son of
Vicente Lee, Sr. and the last will and testament was validly executed and actually notarized by
respondent per affidavit7 of Gloria Nebato, common-law wife of Vicente Lee, Sr. and
corroborated by the joint affidavit8 of the children of Vicente Lee, Sr., namely Elena N. Lee and
Vicente N. Lee, Jr. xxx."9
Respondent further stated that the complaint was filed simply to harass him because the
criminal case filed by complainant against him in the Office of the Ombudsman "did not
prosper."
Respondent did not dispute complainants contention that no copy of the will was on file in the
archives division of the NCCA. He claimed that no copy of the contested will could be found
there because none was filed.

Lastly, respondent pointed out that complainant had no valid cause of action against him as he
(complainant) did not first file an action for the declaration of nullity of the will and demand his
share in the inheritance.
In a resolution dated October 17, 2001, the Court referred the case to the Integrated Bar of the
Philippines (IBP) for investigation, report and recommendation.10
In his report, the investigating commissioner found respondent guilty of violation of pertinent
provisions of the old Notarial Law as found in the Revised Administrative Code. The violation
constituted an infringement of legal ethics, particularly Canon 111 and Rule 1.0112 of the Code
of Professional Responsibility (CPR).13 Thus, the investigating commissioner of the IBP
Commission on Bar Discipline recommended the suspension of respondent for a period of three
months.
The IBP Board of Governors, in its Resolution No. XVII-2006-285 dated May 26, 2006, resolved:
[T]o ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, with modification, the
Report and Recommendation of the Investigating Commissioner of the above-entitled case,
herein made part of this Resolution as Annex "A"; and, finding the recommendation fully
supported by the evidence on record and the applicable laws and rules, and considering
Respondents failure to comply with the laws in the discharge of his function as a notary public,
Atty. Regino B. Tambago is hereby suspended from the practice of law for one year and
Respondents notarial commission is Revoked and Disqualified from reappointment as Notary
Public for two (2) years.14
We affirm with modification.
A will is an act whereby a person is permitted, with the formalities prescribed by law, to control
to a certain degree the disposition of his estate, to take effect after his death.15 A will may either
be notarial or holographic.
The law provides for certain formalities that must be followed in the execution of wills. The
object of solemnities surrounding the execution of wills is to close the door on bad faith and
fraud, to avoid substitution of wills and testaments and to guarantee their truth and
authenticity.16
A notarial will, as the contested will in this case, is required by law to be subscribed at the end
thereof by the testator himself. In addition, it should be attested and subscribed by three or more
credible witnesses in the presence of the testator and of one another.17
The will in question was attested by only two witnesses, Noynay and Grajo. On this
circumstance alone, the will must be considered void.18 This is in consonance with the rule that
acts executed against the provisions of mandatory or prohibitory laws shall be void, except
when the law itself authorizes their validity.
The Civil Code likewise requires that a will must be acknowledged before a notary public by the
testator and the witnesses.19 The importance of this requirement is highlighted by the fact that it
was segregated from the other requirements under Article 805 and embodied in a distinct and
separate provision.20

LEGFORMS ALS3C1415 | 33

An acknowledgment is the act of one who has executed a deed in going before some competent
officer or court and declaring it to be his act or deed. It involves an extra step undertaken
whereby the signatory actually declares to the notary public that the same is his or her own free
act and deed.21 The acknowledgment in a notarial will has a two-fold purpose: (1) to safeguard
the testators wishes long after his demise and (2) to assure that his estate is administered in the
manner that he intends it to be done.

On the issue of whether respondent was under the legal obligation to furnish a copy of the
notarized will to the archives division, Article 806 provides:

A cursory examination of the acknowledgment of the will in question shows that this particular
requirement was neither strictly nor substantially complied with. For one, there was the
conspicuous absence of a notation of the residence certificates of the notarial witnesses Noynay
and Grajo in the acknowledgment. Similarly, the notation of the testators old residence
certificate in the same acknowledgment was a clear breach of the law. These omissions by
respondent invalidated the will.

Respondents failure, inadvertent or not, to file in the archives division a copy of the notarized
will was therefore not a cause for disciplinary action.

As the acknowledging officer of the contested will, respondent was required to faithfully
observe the formalities of a will and those of notarization. As we held in Santiago v. Rafanan:22

1. nature of each instrument executed, sworn to, or acknowledged before him;

Art. 806. Every will must be acknowledged before a notary public by the testator and the
witness. The notary public shall not be required to retain a copy of the will, or file another with
the office of the Clerk of Court. (emphasis supplied)

Nevertheless, respondent should be faulted for having failed to make the necessary entries
pertaining to the will in his notarial register. The old Notarial Law required the entry of the
following matters in the notarial register, in chronological order:

2. person executing, swearing to, or acknowledging the instrument;


The Notarial Law is explicit on the obligations and duties of notaries public. They are required
to certify that the party to every document acknowledged before him had presented the proper
residence certificate (or exemption from the residence tax); and to enter its number, place of
issue and date as part of such certification.

3. witnesses, if any, to the signature;


4. date of execution, oath, or acknowledgment of the instrument;

These formalities are mandatory and cannot be disregarded, considering the degree of
importance and evidentiary weight attached to notarized documents.23 A notary public,
especially a lawyer,24 is bound to strictly observe these elementary requirements.

5. fees collected by him for his services as notary;

The Notarial Law then in force required the exhibition of the residence certificate upon
notarization of a document or instrument:

7. if the instrument is a contract, a brief description of the substance of the instrument.27

Section 251. Requirement as to notation of payment of [cedula] residence tax. Every contract,
deed, or other document acknowledged before a notary public shall have certified thereon that
the parties thereto have presented their proper [cedula] residence certificate or are exempt from
the [cedula] residence tax, and there shall be entered by the notary public as a part of such
certificate the number, place of issue, and date of each [cedula] residence certificate as
aforesaid.25
The importance of such act was further reiterated by Section 6 of the Residence Tax Act26 which
stated:
When a person liable to the taxes prescribed in this Act acknowledges any document before a
notary public xxx it shall be the duty of such person xxx with whom such transaction is had or
business done, to require the exhibition of the residence certificate showing payment of the
residence taxes by such person xxx.
In the issuance of a residence certificate, the law seeks to establish the true and correct identity
of the person to whom it is issued, as well as the payment of residence taxes for the current year.
By having allowed decedent to exhibit an expired residence certificate, respondent failed to
comply with the requirements of both the old Notarial Law and the Residence Tax Act. As much
could be said of his failure to demand the exhibition of the residence certificates of Noynay and
Grajo.

6. give each entry a consecutive number; and

In an effort to prove that he had complied with the abovementioned rule, respondent contended
that he had crossed out a prior entry and entered instead the will of the decedent. As proof, he
presented a photocopy of his notarial register. To reinforce his claim, he presented a photocopy
of a certification28 stating that the archives division had no copy of the affidavit of Bartolome
Ramirez.
A photocopy is a mere secondary evidence. It is not admissible unless it is shown that the
original is unavailable. The proponent must first prove the existence and cause of the
unavailability of the original,29 otherwise, the evidence presented will not be admitted. Thus,
the photocopy of respondents notarial register was not admissible as evidence of the entry of
the execution of the will because it failed to comply with the requirements for the admissibility
of secondary evidence.
In the same vein, respondents attempt to controvert the certification dated September 21,
199930 must fail. Not only did he present a mere photocopy of the certification dated March 15,
2000;31 its contents did not squarely prove the fact of entry of the contested will in his notarial
register.
Notaries public must observe with utmost care32 and utmost fidelity the basic requirements in
the performance of their duties, otherwise, the confidence of the public in the integrity of
notarized deeds will be undermined.33

LEGFORMS ALS3C1415 | 34

Defects in the observance of the solemnities prescribed by law render the entire will invalid.
This carelessness cannot be taken lightly in view of the importance and delicate nature of a will,
considering that the testator and the witnesses, as in this case, are no longer alive to identify the
instrument and to confirm its contents.34 Accordingly, respondent must be held accountable for
his acts. The validity of the will was seriously compromised as a consequence of his breach of
duty.35
In this connection, Section 249 of the old Notarial Law provided:
Grounds for revocation of commission. The following derelictions of duty on the part of a
notary public shall, in the discretion of the proper judge of first instance, be sufficient ground for
the revocation of his commission:
xxx

xxx

xxx

(b) The failure of the notary to make the proper entry or entries in his notarial register touching
his notarial acts in the manner required by law.
xxx

xxx

xxx

with due regard to the provision of existing law and had complied with the elementary
formalities in the performance of his duties xxx," we find that he acted very irresponsibly in
notarizing the will in question. Such recklessness warrants the less severe punishment of
suspension from the practice of law. It is, as well, a sufficient basis for the revocation of his
commission50 and his perpetual disqualification to be commissioned as a notary public.51
WHEREFORE, respondent Atty. Regino B. Tambago is hereby found guilty of professional
misconduct. He violated (1) the Lawyers Oath; (2) Rule 138 of the Rules of Court; (3) Canon 1
and Rule 1.01 of the Code of Professional Responsibility; (4) Art. 806 of the Civil Code and (5)
the provisions of the old Notarial Law.
Atty. Regino B. Tambago is hereby SUSPENDED from the practice of law for one year and his
notarial commission REVOKED. Because he has not lived up to the trustworthiness expected of
him as a notary public and as an officer of the court, he is PERPETUALLY DISQUALIFIED from
reappointment as a notary public.
Let copies of this Resolution be furnished to all the courts of the land, the Integrated Bar of the
Philippines and the Office of the Bar Confidant, as well as made part of the personal records of
respondent.

(f) The failure of the notary to make the proper notation regarding cedula certificates.36
These gross violations of the law also made respondent liable for violation of his oath as a
lawyer and constituted transgressions of Section 20 (a), Rule 138 of the Rules of Court37 and
Canon 138 and Rule 1.0139 of the CPR.
The first and foremost duty of a lawyer is to maintain allegiance to the Republic of the
Philippines, uphold the Constitution and obey the laws of the land.40 For a lawyer is the servant
of the law and belongs to a profession to which society has entrusted the administration of law
and the dispensation of justice.41
While the duty to uphold the Constitution and obey the law is an obligation imposed on every
citizen, a lawyer assumes responsibilities well beyond the basic requirements of good
citizenship. As a servant of the law, a lawyer should moreover make himself an example for
others to emulate.42 Being a lawyer, he is supposed to be a model in the community in so far as
respect for the law is concerned.43
The practice of law is a privilege burdened with conditions.44 A breach of these conditions
justifies disciplinary action against the erring lawyer. A disciplinary sanction is imposed on a
lawyer upon a finding or acknowledgment that he has engaged in professional misconduct.45
These sanctions meted out to errant lawyers include disbarment, suspension and reprimand.
Disbarment is the most severe form of disciplinary sanction.46 We have held in a number of
cases that the power to disbar must be exercised with great caution47 and should not be decreed
if any punishment less severe such as reprimand, suspension, or fine will accomplish the end
desired.48 The rule then is that disbarment is meted out only in clear cases of misconduct that
seriously affect the standing and character of the lawyer as an officer of the court.49
Respondent, as notary public, evidently failed in the performance of the elementary duties of his
office. Contrary to his claims that he "exercised his duties as Notary Public with due care and
LEGFORMS ALS3C1415 | 35

REGISTRATION OF DOCUMENTS

2.

1.

This is a petition for review on certiorari seeking the reversal of the March 23, 1990 decision of
the Court of Appeals which ruled that the petitioner's purchase of a farm tractor was not validly
consummated and ordered a complaint for its recovery dismissed.

PRESIDENTIAL DECREE NO. 1529, PROPERTY REGISTRATION DECREE, SEC.


112

Section 112. Forms in conveyancing. The Commissioner of Land Registration shall prepare
convenient blank forms as may be necessary to help facilitate the proceedings in land
registration and shall take charge of the printing of land title forms.
Deeds, conveyances, encumbrances, discharges, powers of attorney and other voluntary
instruments, whether affecting registered or unregistered land, executed in accordance with law
in the form of public instruments shall be registerable: Provided, that, every such instrument
shall be signed by the person or persons executing the same in the presence of at least two
witnesses who shall likewise sign thereon, and shall acknowledged to be the free act and deed of
the person or persons executing the same before a notary public or other public officer
authorized by law to take acknowledgment. Where the instrument so acknowledged consists of
two or more pages including the page whereon acknowledgment is written, each page of the
copy which is to be registered in the office of the Register of Deeds, or if registration is not
contemplated, each page of the copy to be kept by the notary public, except the page where the
signatures already appear at the foot of the instrument, shall be signed on the left margin thereof
by the person or persons executing the instrument and their witnesses, and all the ages sealed
with the notarial seal, and this fact as well as the number of pages shall be stated in the
acknowledgment. Where the instrument acknowledged relates to a sale, transfer, mortgage or
encumbrance of two or more parcels of land, the number thereof shall likewise be set forth in
said acknowledgment.

DY V. COURT OF APPEALS, G.R. NO. 92989, 8 JULY 1991

The facts as established by the records are as follows:


The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo Dy
purchased a truck and a farm tractor through financing extended by Libra Finance and
Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as security for
the loan.
The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he wrote a
letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the said tractor and
assume the mortgage debt of the latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the
petitioner's request.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of the
petitioner over the tractor in question.
At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo Dy's
failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate release
could not be effected because Wilfredo Dy had obtained financing not only for said tractor but
also for a truck and Libra insisted on full payment for both.

TRANSFER OF OWNERSHIP
1.

CIVIL CODE, ARTICLES 1498 AND 1544

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred.
With regard to movable property, its delivery may also be made by the delivery of the keys of
the place or depository where it is stored or kept. (1463a)
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith. (1473)

The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so that full
payment could be made for both. On November 22, 1979, a PNB check was issued in the amount
of P22,000.00 in favor of Libra, thus settling in full the indebtedness of Wilfredo Dy with the
financing firm. Payment having been effected through an out-of-town check, Libra insisted that
it be cleared first before Libra could release the chattels in question.
Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a collection
case to recover the sum of P12,269.80 was pending in another court in Cebu.
On the strength of an alias writ of execution issued on December 27, 1979, the provincial sheriff
was able to seize and levy on the tractor which was in the premises of Libra in Carmen, Cebu.
The tractor was subsequently sold at public auction where Gelac Trading was the lone bidder.
Later, Gelac sold the tractor to one of its stockholders, Antonio Gonzales.
It was only when the check was cleared on January 17, 1980 that the petitioner learned about
GELAC having already taken custody of the subject tractor. Consequently, the petitioner filed
an action to recover the subject tractor against GELAC Trading with the Regional Trial Court of
Cebu City.

LEGFORMS ALS3C1415 | 36

On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive portion
of the decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
pronouncing that the plaintiff is the owner of the tractor, subject matter of this case, and
directing the defendants Gelac Trading Corporation and Antonio Gonzales to return the same to
the plaintiff herein; directing the defendants jointly and severally to pay to the plaintiff the
amount of P1,541.00 as expenses for hiring a tractor; P50,000 for moral damages; P50,000 for
exemplary damages; and to pay the cost. (Rollo, pp. 35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the complaint
with costs against the petitioner. The Court of Appeals held that the tractor in question still
belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of the alias writ
of execution issued in Civil Case No. R-16646.
The petitioner now comes to the Court raising the following questions:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE
FACTS AND ERRED IN NOT AFFIRMING THE TRIAL COURT'S FINDING THAT
OWNERSHIP OF THE FARM TRACTOR HAD ALREADY PASSED TO HEREIN PETITIONER
WHEN SAID TRACTOR WAS LEVIED ON BY THE SHERIFF PURSUANT TO AN ALIAS
WRIT OF EXECUTION ISSUED IN ANOTHER CASE IN FAVOR OF RESPONDENT GELAC
TRADING INC.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS EMBARKED ON MERE
CONJECTURE AND SURMISE IN HOLDING THAT THE SALE OF THE AFORESAID
TRACTOR TO PETITIONER WAS DONE IN FRAUD OF WILFREDO DY'S CREDITORS,
THERE BEING NO EVIDENCE OF SUCH FRAUD AS FOUND BY THE TRIAL COURT.

The rule is settled that the chattel mortgagor continues to be the owner of the property, and
therefore, has the power to alienate the same; however, he is obliged under pain of penal
liability, to secure the written consent of the mortgagee. (Francisco, Vicente, Jr., Revised Rules of
Court in the Philippines, (1972), Volume IV-B Part 1, p. 525). Thus, the instruments of mortgage
are binding, while they subsist, not only upon the parties executing them but also upon those
who later, by purchase or otherwise, acquire the properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the mortgaged property in
favor of a third person, therefore, affects not the validity of the sale but only the penal liability of
the mortgagor under the Revised Penal Code and the binding effect of such sale on the
mortgagee under the Deed of Chattel Mortgage.
xxx

xxx

xxx

The mortgagor who gave the property as security under a chattel mortgage did not part with the
ownership over the same. He had the right to sell it although he was under the obligation to
secure the written consent of the mortgagee or he lays himself open to criminal prosecution
under the provision of Article 319 par. 2 of the Revised Penal Code. And even if no consent was
obtained from the mortgagee, the validity of the sale would still not be affected.
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the subject
tractor. There is no dispute that the consent of Libra Finance was obtained in the instant case. In
a letter dated August 27, 1979, Libra allowed the petitioner to purchase the tractor and assume
the mortgage debt of his brother. The sale between the brothers was therefore valid and binding
as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to
1501 or in any other manner signing an agreement that the possession is transferred from the
vendor to the vendee. We agree with the petitioner that Articles 1498 and 1499 are applicable in
the case at bar.
Article 1498 states:

C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE
FACTS AND ERRED IN NOT SUSTAINING THE FINDING OF THE TRIAL COURT THAT
THE SALE OF THE TRACTOR BY RESPONDENT GELAC TRADING TO ITS CORESPONDENT ANTONIO V. GONZALES ON AUGUST 2, 1980 AT WHICH TIME BOTH
RESPONDENTS ALREADY KNEW OF THE FILING OF THE INSTANT CASE WAS
VIOLATIVE OF THE HUMAN RELATIONS PROVISIONS OF THE CIVIL CODE AND
RENDERED THEM LIABLE FOR THE MORAL AND EXEMPLARY DAMAGES SLAPPED
AGAINST THEM BY THE TRIAL COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the deed of sale, no constructive
delivery was effected since the consummation of the sale depended upon the clearance and
encashment of the check which was issued in payment of the subject tractor.
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174 SCRA 80 [1989]),
we stated that:

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred.
xxx

xxx

xxx

Article 1499 provides:


Article 1499.
The delivery of movable property may likewise be made by the mere
consent or agreement of the contracting parties, if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale, or if the latter already had it in his possession for
any other reason. (1463a)
In the instant case, actual delivery of the subject tractor could not be made. However, there was
constructive delivery already upon the execution of the public instrument pursuant to Article

LEGFORMS ALS3C1415 | 37

1498 and upon the consent or agreement of the parties when the thing sold cannot be
immediately transferred to the possession of the vendee. (Art. 1499)
The respondent court avers that the vendor must first have control and possession of the thing
before he could transfer ownership by constructive delivery. Here, it was Libra Finance which
was in possession of the subject tractor due to Wilfredo's failure to pay the amortization as a
preliminary step to foreclosure. As mortgagee, he has the right of foreclosure upon default by
the mortgagor in the performance of the conditions mentioned in the contract of mortgage. The
law implies that the mortgagee is entitled to possess the mortgaged property because possession
is necessary in order to enable him to have the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of the subject tractor,
his right of ownership was not divested from him upon his default. Neither could it be said that
Libra was the owner of the subject tractor because the mortgagee can not become the owner of
or convert and appropriate to himself the property mortgaged. (Article 2088, Civil Code) Said
property continues to belong to the mortgagor. The only remedy given to the mortgagee is to
have said property sold at public auction and the proceeds of the sale applied to the payment of
the obligation secured by the mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is
no showing that Libra Finance has already foreclosed the mortgage and that it was the new
owner of the subject tractor. Undeniably, Libra gave its consent to the sale of the subject tractor
to the petitioner. It was aware of the transfer of rights to the petitioner.
Where a third person purchases the mortgaged property, he automatically steps into the shoes
of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177 SCRA 521 [1989]). His
right of ownership shall be subject to the mortgage of the thing sold to him. In the case at bar,
the petitioner was fully aware of the existing mortgage of the subject tractor to Libra. In fact,
when he was obtaining Libra's consent to the sale, he volunteered to assume the remaining
balance of the mortgage debt of Wilfredo Dy which Libra undeniably agreed to.

It is inconsequential whether a third party claim has been filed or not by the petitioner during
the time the sheriff levied on the subject tractor. A person other than the judgment debtor who
claims ownership or right over levied properties is not precluded, however, from taking other
legal remedies to prosecute his claim. (Consolidated Bank and Trust Corp. v. Court of Appeals,
supra) This is precisely what the petitioner did when he filed the action for replevin with the
RTC.
Anent the second and third issues raised, the Court accords great respect and weight to the
findings of fact of the trial court. There is no sufficient evidence to show that the sale of the
tractor was in fraud of Wilfredo and creditors. While it is true that Wilfredo and Perfecto are
brothers, this fact alone does not give rise to the presumption that the sale was fraudulent.
Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663 [1963]). Moreover, fraud
can not be presumed; it must be established by clear convincing evidence.
We agree with the trial court's findings that the actuations of GELAC Trading were indeed
violative of the provisions on human relations. As found by the trial court, GELAC knew very
well of the transfer of the property to the petitioners on July 14, 1980 when it received summons
based on the complaint for replevin filed with the RTC by the petitioner. Notwithstanding said
summons, it continued to sell the subject tractor to one of its stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals
promulgated on March 23, 1990 is SET ASIDE and the decision of the Regional Trial Court dated
April 8, 1988 is REINSTATED.

The payment of the check was actually intended to extinguish the mortgage obligation so that
the tractor could be released to the petitioner. It was never intended nor could it be considered
as payment of the purchase price because the relationship between Libra and the petitioner is
not one of sale but still a mortgage. The clearing or encashment of the check which produced the
effect of payment determined the full payment of the money obligation and the release of the
chattel mortgage. It was not determinative of the consummation of the sale. The transaction
between the brothers is distinct and apart from the transaction between Libra and the petitioner.
The contention, therefore, that the consummation of the sale depended upon the encashment of
the check is untenable.
The sale of the subject tractor was consummated upon the execution of the public instrument on
September 4, 1979. At this time constructive delivery was already effected. Hence, the subject
tractor was no longer owned by Wilfredo Dy when it was levied upon by the sheriff in
December, 1979. Well settled is the rule that only properties unquestionably owned by the
judgment debtor and which are not exempt by law from execution should be levied upon or
sought to be levied upon. For the power of the court in the execution of its judgment extends
only over properties belonging to the judgment debtor. (Consolidated Bank and Trust Corp. v.
Court of Appeals, G.R. No. 78771, January 23, 1991).
The respondents further claim that at that time the sheriff levied on the tractor and took legal
custody thereof no one ever protested or filed a third party claim.
LEGFORMS ALS3C1415 | 38

3.

TEN FORTY REALTY AND DEVELOPMENT CORP V. CRUZ, G.R. NO. 151212, 10
SEPTEMBER 2003

In an ejectment suit, the question of ownership may be provisionally ruled upon for the sole
purpose of determining who is entitled to possession de facto. In the present case, both parties
base their alleged right to possess on their right to own. Hence, the Court of Appeals did not err
in passing upon the question of ownership to be able to decide who was entitled to physical
possession of the disputed land.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify the
August 31, 2001 Decision[2] and December 19, 2001 Resolution[3] of the Court of Appeals (CA)
in CA- GR SP No. 64861. The dispositive portion of the assailed Decision is as follows:
WHEREFORE, premises considered, the petition is hereby DISMISSED and the Decision dated
May 4, 2001 is hereby AFFIRMED.[4]
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
A complaint for ejectment was filed by [Petitioner Ten Forty Realty and Development
Corporation] against x x x [Respondent Marina Cruz] before the Municipal Trial Court in Cities
(MTCC) of Olongapo City, docketed as Civil Case 4269, which alleged that: petitioner is the true
and absolute owner of a parcel of lot and residential house situated in #71 18th Street, E.B.B.
Olongapo City, particularly described as:
A parcel of residential house and lot situated in the above-mentioned address containing an
area of 324 square meters more or less bounded on the Northeast by 041 (Lot 255, Ts-308); on the
Southeast by 044 (Lot 255, Ts-308); on the Southwest by 043 (Lot 226-A & 18th street) and on the
Northwest by 045 (Lot 227, Ts-308) and declared for taxation purposes in the name of
[petitioner] under T.D. No. 002-4595-R and 002-4596.
having acquired the same on December 5, 1996 from Barbara Galino by virtue of a Deed of
Absolute Sale; the sale was acknowledged by said Barbara Galino through a 'Katunayan';
payment of the capital gains tax for the transfer of the property was evidenced by a Certification
Authorizing Registration issued by the Bureau of Internal Revenue; petitioner came to know
that Barbara Galino sold the same property on April 24, 1998 to Cruz, who immediately
occupied the property and which occupation was merely tolerated by petitioner; on October 16,
1998, a complaint for ejectment was filed with the Barangay East Bajac-Bajac, Olongapo City but
for failure to arrive at an amicable settlement, a Certificate to File Action was issued; on April
12, 1999 a demand letter was sent to [respondent] to vacate and pay reasonable amount for the
use and occupation of the same, but was ignored by the latter; and due to the refusal of
[respondent] to vacate the premises, petitioner was constrained to secure the services of a
counsel for an agreed fee of P5,000.00 as attorneys fee and P500.00 as appearance fee and
incurred an expense of P5,000.00 for litigation.

In respondents Answer with Counterclaim, it was alleged that: petitioner is not qualified to
own the residential lot in dispute, being a public land; according to Barbara Galino, she did not
sell her house and lot to petitioner but merely obtained a loan from Veronica Lorenzana; the
payment of the capital gains tax does not necessarily show that the Deed of Absolute Sale was at
that time already in existence; the court has no jurisdiction over the subject matter because the
complaint was filed beyond the one (1) year period after the alleged unlawful deprivation of
possession; there is no allegation that petitioner had been in prior possession of the premises
and the same was lost thru force, stealth or violence; evidence will show that it was Barbara
Galino who was in possession at the time of the sale and vacated the property in favor of
respondent; never was there an occasion when petitioner occupied a portion of the premises,
before respondent occupied the lot in April 1998, she caused the cancellation of the tax
declaration in the name of Barbara Galino and a new one issued in respondents name;
petitioner obtained its tax declaration over the same property on November 3, 1998, seven (7)
months [after] the respondent [obtained hers]; at the time the house and lot [were] bought by
respondent, the house was not habitable, the power and water connections were disconnected;
being a public land, respondent filed a miscellaneous sales application with the Community
Environment and Natural Resources Office in Olongapo City; and the action for ejectment
cannot succeed where it appears that respondent had been in possession of the property prior to
the petitioner.[5]
In a Decision[6] dated October 30, 2000, the Municipal Trial Court in Cities (MTCC) ordered
respondent to vacate the property and surrender to petitioner possession thereof. It also
directed her to pay, as damages for its continued unlawful use, P500 a month from April 24,
1999 until the property was vacated, P5,000 as attorneys fees, and the costs of the suit.
On appeal, the Regional Trial Court[7] (RTC) of Olongapo City (Branch 72) reversed the MTCC.
The RTC ruled as follows: 1) respondents entry into the property was not by mere tolerance of
petitioner, but by virtue of a Waiver and Transfer of Possessory Rights and Deed of Sale in her
favor; 2) the execution of the Deed of Sale without actual transfer of the physical possession did
not have the effect of making petitioner the owner of the property, because there was no
delivery of the object of the sale as provided for in Article 1428 of the Civil Code; and 3) being a
corporation, petitioner was disqualified from acquiring the property, which was public land.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner had failed to make a case for unlawful detainer,
because no contract -- express or implied -- had been entered into by the parties with regard to
possession of the property. It ruled that the action should have been for forcible entry, in which
prior physical possession was indispensable -- a circumstance petitioner had not shown either.
The appellate court also held that petitioner had challenged the RTCs ruling on the question of
ownership for the purpose of compensating for the latters failure to counter such ruling. The
RTC had held that, as a corporation, petitioner had no right to acquire the property which was
alienable public land.
Hence, this Petition.[8]
Issues
Petitioner submits the following issues for our consideration:
LEGFORMS ALS3C1415 | 39

1.
The Honorable Court of Appeals had clearly erred in not holding that [r]espondents
occupation or possession of the property in question was merely through the tolerance or
permission of the herein [p]etitioner;
[2.] The Honorable Court of Appeals had likewise erred in holding that the ejectment case
should have been a forcible entry case where prior physical possession is indispensable; and
[3.]
The Honorable Court of Appeals had also erred when it ruled that the herein
[r]espondents possession or occupation of the said property is in the nature of an exercise of
ownership which should put the herein [p]etitioner on guard.[9]
The Courts Ruling
The Petition has no merit.
First Issue:
Alleged Occupation by Tolerance
Petitioner faults the CA for not holding that the former merely tolerated respondents
occupation of the subject property. By raising this issue, petitioner is in effect asking this Court
to reassess factual findings. As a general rule, this kind of reassessment cannot be done through
a petition for review on certiorari under Rule 45 of the Rules of Court, because this Court is not a
trier of facts; it reviews only questions of law.[10] Petitioner has not given us ample reasons to
depart from the general rule.

nature, and that the one year time bar to suit is but in pursuance of the summary nature of the
action.[14]
In this case, the Complaint and the other pleadings do not recite any averment of fact that would
substantiate the claim of petitioner that it permitted or tolerated the occupation of the property
by Respondent Cruz. The Complaint contains only bare allegations that 1) respondent
immediately occupied the subject property after its sale to her, an action merely tolerated by
petitioner;[15] and 2) her allegedly illegal occupation of the premises was by mere tolerance.[16]
These allegations contradict, rather than support, petitioners theory that its cause of action is for
unlawful detainer. First, these arguments advance the view that respondents occupation of the
property was unlawful at its inception. Second, they counter the essential requirement in
unlawful detainer cases that petitioners supposed act of sufferance or tolerance must be present
right from the start of a possession that is later sought to be recovered.[17]
As the bare allegation of petitioners tolerance of respondents occupation of the premises has
not been proven, the possession should be deemed illegal from the beginning. Thus, the CA
correctly ruled that the ejectment case should have been for forcible entry -- an action that had
already prescribed, however, when the Complaint was filed on May 12, 1999. The prescriptive
period of one year for forcible entry cases is reckoned from the date of respondents actual entry
into the land, which in this case was on April 24, 1998.
Second Issue:
Nature of the Case

On the basis of the facts found by the CA and the RTC, we find that petitioner failed to
substantiate its case for unlawful detainer. Admittedly, no express contract existed between the
parties. Not shown either was the corporations alleged tolerance of respondents possession.

Much of the difficulty in the present controversy stems from the legal characterization of the
ejectment Complaint filed by petitioner. Specifically, was it for unlawful detainer or for forcible
entry?

While possession by tolerance may initially be lawful, it ceases to be so upon the owners
demand that the possessor by tolerance vacate the property.[11] To justify an action for unlawful
detainer, the permission or tolerance must have been present at the beginning of the
possession.[12] Otherwise, if the possession was unlawful from the start, an action for unlawful
detainer would be an improper remedy. Sarona v. Villegas[13] elucidates thus:

The answer is given in Section 1 of Rule 70 of the Rules of Court, which we reproduce as
follows:

A close assessment of the law and the concept of the word tolerance confirms our view
heretofore expressed that such tolerance must be present right from the start of possession
sought to be recovered, to categorize a cause of action as one of unlawful detainer not of forcible
entry. Indeed, to hold otherwise would espouse a dangerous doctrine. And for two reasons.
First. Forcible entry into the land is an open challenge to the right of the possessor. Violation of
that right authorizes the speedy redress in the inferior court provided for in the rules. If one
year from the forcible entry is allowed to lapse before suit is filed, then the remedy ceases to be
speedy; and the possessor is deemed to have waived his right to seek relief in the inferior court.
Second, if a forcible entry action in the inferior court is allowed after the lapse of a number of
years, then the result may well be that no action for forcible entry can really prescribe. No
matter how long such defendant is in physical possession, plaintiff will merely make a demand,
bring suit in the inferior court upon a plea of tolerance to prevent prescription to set in and
summarily throw him out of the land. Such a conclusion is unreasonable. Especially if we bear
in mind the postulates that proceedings of forcible entry and unlawful detainer are summary in

SECTION 1. Who may institute proceedings, and when. - Subject to the provisions of the next
succeeding section, a person deprived of the possession of any land or building by force,
intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against
whom the possession of any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession, by virtue of any contract, express or implied, or the
legal representatives or assigns of any such lessor, vendor, vendee, or other person, may, at any
time within one (1) year after such unlawful deprivation or withholding of possession, bring an
action in the proper Municipal Trial Court against the person or persons unlawfully
withholding or depriving of possession, or any person or persons claiming under them, for the
restitution of such possession, together with damages and costs.
While both causes of action deal only with the sole issue of physical or de facto possession,[18]
the two cases are really separate and distinct, as explained below:
x x x. In forcible entry, one is deprived of physical possession of land or building by means of
force, intimidation, threat, strategy, or stealth. In unlawful detainer, one unlawfully withholds
possession thereof after the expiration or termination of his right to hold possession under any
contract, express or implied. In forcible entry, the possession is illegal from the beginning and
LEGFORMS ALS3C1415 | 40

the basic inquiry centers on who has the prior possession de facto. In unlawful detainer,
possession was originally lawful but became unlawful by the expiration or termination of
right to possess, hence the issue of rightful possession is decisive for, in such action,
defendant is in actual possession and the plaintiffs cause of action is the termination of
defendants right to continue in possession.

the
the
the
the

upon the issue of ownership only for the purpose of resolving the issue of possession de
facto.[30] The CAs holding is moreover in accord with jurisprudence and the law.

What determines the cause of action is the nature of defendants entry into the land. If the
entry is illegal, then the action which may be filed against the intruder within one year
therefrom is forcible entry. If, on the other hand, the entry is legal but the possession thereafter
became illegal, the case is one of unlawful detainer which must be filed within one year from the
date of the last demand.[19]

In a contract of sale, the buyer acquires the thing sold only upon its delivery in any of the ways
specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee.[31] With respect to incorporeal
property, Article 1498 lays down the general rule: the execution of a public instrument shall be
equivalent to the delivery of the thing that is the object of the contract if, from the deed, the
contrary does not appear or cannot be clearly inferred.

It is axiomatic that what determines the nature of an action as well as which court has
jurisdiction over it are the allegations in the complaint[20] and the character of the relief
sought.[21]
In its Complaint, petitioner alleged that, having acquired the subject property from Barbara
Galino on December 5, 1996,[22] it was the true and absolute owner[23] thereof; that Galino had
sold the property to Respondent Cruz on April 24, 1998;[24] that after the sale, the latter
immediately occupied the property, an action that was merely tolerated by petitioner;[25] and
that, in a letter given to respondent on April 12, 1999,[26] petitioner had demanded that the
former vacate the property, but that she refused to do so.[27] Petitioner thereupon prayed for
judgment ordering her to vacate the property and to pay reasonable rentals for the use of the
premises, attorneys fees and the costs of the suit.[28]

Execution of a Deed of Sale


Not Sufficient as Delivery

However, ownership is transferred not by contract but by tradition or delivery.[32] Nowhere in


the Civil Code is it provided that the execution of a Deed of Sale is a conclusive presumption of
delivery of possession of a piece of real estate.[33]
This Court has held that the execution of a public instrument gives rise only to a prima facie
presumption of delivery. Such presumption is destroyed when the delivery is not effected
because of a legal impediment.[34] Pasagui v. Villablanca[35] had earlier ruled that such
constructive or symbolic delivery, being merely presumptive, was deemed negated by the
failure of the vendee to take actual possession of the land sold.

The above allegations appeared to show the elements of unlawful detainer. They also conferred
initiatory jurisdiction on the MTCC, because the case was filed a month after the last demand to
vacate -- hence, within the one-year prescriptive period.

It is undisputed that petitioner did not occupy the property from the time it was allegedly sold
to it on December 5, 1996 or at any time thereafter. Nonetheless, it maintains that Galinos
continued stay in the premises from the time of the sale up to the time respondents occupation
of the same on April 24, 1998, was possession held on its behalf and had the effect of delivery
under the law.[36]

However, what was actually proven by petitioner was that possession by respondent had been
illegal from the beginning. While the Complaint was crafted to be an unlawful detainer suit,
petitioners real cause of action was for forcible entry, which had already prescribed.
Consequently, the MTCC had no more jurisdiction over the action.

Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain control and
possession of the property, because Galino had continued to exercise ownership rights over the
realty. That is, she had remained in possession, continued to declare it as her property for tax
purposes and sold it to respondent in 1998.

The appellate court, therefore, did not err when it ruled that petitioners Complaint for unlawful
detainer was a mere subterfuge or a disguised substitute action for forcible entry, which had
already prescribed. To repeat, to maintain a viable action for forcible entry, plaintiff must have
been in prior physical possession of the property; this is an essential element of the suit.[29]

For its part, the CA found it highly unbelievable that petitioner -- which claims to be the owner
of the disputed property -- would tolerate possession of the property by respondent from April
24, 1998 up to October 16, 1998. How could it have been so tolerant despite its knowledge that
the property had been sold to her, and that it was by virtue of that sale that she had undertaken
major repairs and improvements on it?

Third Issue:
Alleged Acts of Ownership
Petitioner next questions the CAs pronouncement that respondents occupation of the property
was an exercise of a right flowing from a claim of ownership. It submits that the appellate court
should not have passed upon the issue of ownership, because the only question for resolution in
an ejectment suit is that of possession de facto.
Clearly, each of the parties claimed the right to possess the disputed property because of alleged
ownership of it. Hence, no error could have been imputed to the appellate court when it passed

Petitioner should have likewise been put on guard by respondents declaration of the property
for tax purposes on April 23, 1998,[37] as annotated in the tax certificate filed seven months
later.[38] Verily, the tax declaration represented an adverse claim over the unregistered property
and was inimical to the right of petitioner.
Indeed, the above circumstances derogated its claim of control and possession of the property.
Order of Preference in Double
Sale of Immovable Property

LEGFORMS ALS3C1415 | 41

The ownership of immovable property sold to two different buyers at different times is
governed by Article 1544 of the Civil Code, which reads as follows:
Article 1544. x x x
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
Galino allegedly sold the property in question to petitioner on December 5, 1996 and,
subsequently, to respondent on April 24, 1998. Petitioner thus argues that being the first buyer,
it has a better right to own the realty. However, it has not been able to establish that its Deed of
Sale was recorded in the Registry of Deeds of Olongapo City.[39] Its claim of an unattested and
unverified notation on its Deed of Absolute Sale[40] is not equivalent to registration. It admits
that, indeed, the sale has not been recorded in the Registry of Deeds.[41]
In the absence of the required inscription, the law gives preferential right to the buyer who in
good faith is first in possession. In determining the question of who is first in possession, certain
basic parameters have been established by jurisprudence.
First, the possession mentioned in Article 1544 includes not only material but also symbolic
possession.[42] Second, possessors in good faith are those who are not aware of any flaw in their
title or mode of acquisition.[43] Third, buyers of real property that is in the possession of
persons other than the seller must be wary -- they must investigate the rights of the
possessors.[44] Fourth, good faith is always presumed; upon those who allege bad faith on the
part of the possessors rests the burden of proof.[45]

law according to the uses to which they may be devoted. Alienable lands of the public domain
shall be limited to agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a period not exceeding twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the Philippines may not
lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by
purchase, homestead, or grant. x x x. (Italics supplied)
While corporations cannot acquire land of the public domain, they can however acquire private
land.[46] Hence, the next issue that needs to be resolved is the determination of whether the
disputed property is private land or of the public domain.
According to the certification by the City Planning and Development Office of Olongapo City,
the contested property in this case is alienable and disposable public land.[47] It was for this
reason that respondent filed a miscellaneous sales application to acquire it.[48]
On the other hand, petitioner has not presented proof that, at the time it purchased the property
from Galino, the property had ceased to be of the public domain and was already private land.
The established rule is that alienable and disposable land of the public domain held and
occupied by a possessor -- personally or through predecessors-in-interest, openly, continuously,
and exclusively for 30 years -- is ipso jure converted to private property by the mere lapse of
time.[49]
In view of the foregoing, we affirm the appellate courts ruling that respondent is entitled to
possession de facto. This determination, however, is only provisional in nature.[50] Well-settled
is the rule that an award of possession de facto over a piece of property does not constitute res
judicata as to the issue of its ownership.[51]
WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.

Earlier, we ruled that the subject property had not been delivered to petitioner; hence, it did not
acquire possession either materially or symbolically. As between the two buyers, therefore,
respondent was first in actual possession of the property.
Petitioner has not proven that respondent was aware that her mode of acquiring the property
was defective at the time she acquired it from Galino. At the time, the property -- which was
public land -- had not been registered in the name of Galino; thus, respondent relied on the tax
declarations thereon. As shown, the formers name appeared on the tax declarations for the
property until its sale to the latter in 1998. Galino was in fact occupying the realty when
respondent took over possession. Thus, there was no circumstance that could have placed the
latter upon inquiry or required her to further investigate petitioners right of ownership.
Disqualification from Ownership
of Alienable Public Land
Private corporations are disqualified from acquiring lands of the public domain, as provided
under Section 3 of Article XII of the Constitution, which we quote:
Sec. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral
lands, and national parks. Agricultural lands of the public domain may be further classified by
LEGFORMS ALS3C1415 | 42

EFFECTIVITY AS AGAINST THIRD PERSONS


1.

CIVIL CODE, ARTICLES 1625 AND 1772

Art. 1625. An assignment of a credit, right or action shall produce no effect as against third
person, unless it appears in a public instrument, or the instrument is recorded in the Registry of
Property in case the assignment involves real property. (1526)
Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in
money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.
Failure to comply with the requirements of the preceding paragraph shall not affect the liability
of the partnership and the members thereof to third persons. (n)

2.

FAMILY CODE, ARTICLE 77

Art. 77. The marriage settlements and any modification thereof shall be in writing, signed by the
parties and executed before the celebration of the marriage. They shall not prejudice third
persons unless they are registered in the local civil registry where the marriage contract is
recorded as well as in the proper registries of properties.

2.
For the purpose of these presents, or for the purpose of securing the payment of any
loan, indebtedness or obligation which my attorney-in-fact may obtain or contract with the
bank, its renewal, extension of payment of the whole or any part thereof, said attorney-in-fact is
hereby authorized and empowered to transfer and convey by way of mortgage in favor of the
bank, ... (the Disputed Property).
On 8 April 1983, CRCP executed a Real Estate Mortgage over the Disputed Property in favor of
FINASIA Investment and Finance Corporation to secure a loan of P1 million. The mortgage
contract specifically provided that in the event of default in payment, the mortgagee may
immediately foreclose the mortgage judicially or extrajudicially. The promissory note
evidencing the indebtedness was dated 4 March 1983.
The Special Power of Attorney executed by plaintiff-appellant in CRCP's favor, the Real Estate
Mortgage by CRCP in favor of FINASIA, together with the Board Resolution dated 28 March
1983 authorizing the CRCP President to sign for and on its behalf, were duly annotated on the
Title on 12 April 1983.
On 29 July 1983, FINASIA executed in favor of defendant-appellee, Pioneer Savings & Loan
Bank, Inc. (Defendant Bank, for brevity), an "Outright Sale of Receivables without Recourse"
including the receivable of P610,752.59 from CRCP.
On 21 May 1984, FINASIA executed a "Supplemental Deed of Assignment" in favor of
Defendant Bank confirming and ratifying the assignment in the latter's favor of the receivable of
P610,752.59 from CRCP and of the mortgage constituted by CRCP over the disputed property.
On 12 July 1984, the aforesaid Supplemental Deed of Assignment was inscribed on the Title.

3.

SANTIAGO V. PIONEER SAVINGS AND LOAN BANK, G.R. NO. 77502, 15


JANUARY 1988

An appeal certified by the Court of Appeals to this Tribunal for determination since only a
question of law is involved.
The facts are not controverted.
Plaintiff-appellant, Emilia P. Santiago, is the registered owner of a parcel of land situated at
Polo, Valenzuela, Metro Manila, with an area of approximately 39,007 square meters, covered by
T.C.T. No. B-41669 (briefly, the Title) of the Register of Deeds of Caloocan City (hereinafter,
simply the Disputed Property).
On 7 April 1983, plaintiff-appellant executed a Special Power of Attorney in favor of
Construction Resources Corporation of the Philippines (CRCP, for short) authorizing and
empowering CRCP:
1. To borrow money and make, execute, sign and deliver mortgages of real estate now owned by
me and standing in my name and to make, sign, execute and deliver any and all promissory
notes necessary in the premises.

CRCP failed to settle its obligation and Defendant Bank opted for extrajudicial foreclosure of the
mortgage. The notice of auction sale was scheduled on 16 May 1985.
On 13 May 1985, on learning of the intended sale, plaintiff-appellant filed before the Regional
Trial Court of Valenzuela, Metro Manila, Branch CLXXII, an action for declaration of nullity of
the real estate mortgage with an application for a Writ of Preliminary Injunction (Civil Case No.
2231-V-55).
On 14 May 1985, the Trial Court 1 issued a Temporary Restraining Order enjoining the sale at
public auction of the Disputed Property.
Basically, plaintiff-appellant claimed in her Complaint that she was not aware of any real estate
mortgage she had executed in favor of Defendant Bank; that she had not authorized anyone to
execute any document for the extrajudicial foreclosure of the real estate mortgage constituted on
the Disputed Property and that since the notice of Sheriffs sale did not include her as a party to
the foreclosure proceedings, it is not binding on her nor on her property.
Defendant Bank opposed the application for Preliminary Injunction and asserted its right to
extrajudicially foreclose the mortgage on the Disputed Property based on recorded public
documents.
During the hearing on the petition for Preliminary Injunction, plaintiff-appellant, through
counsel, admitted the due execution of plaintiff-appellant's Special Power of Attorney in favor
LEGFORMS ALS3C1415 | 43

of CRCP, the Real Estate Mortgage by CRCP to FINASIA, the Outright Sale of Receivables by
FINASIA to Defendant Bank, as well the Supplemental Deed of Assignment by FINASIA to
Defendant Bank.
On 30 May 1985, the Trial Court granted the Petition for Preliminary Injunction enjoining the
public auction sale of the mortgaged property upon plaintiff-appellant's posting of a bond in the
amount of P100,000.00.
On 7 June 1985, Defendant Bank filed a Motion to Dismiss the main case on the ground that the
complaint did not state a cause of action followed on 24 June 1985 with a Motion for
Reconsideration of the Order granting the Writ of Preliminary Injunction, both of which Motions
plaintiff-appellant opposed.
On 30 August 1985, the Trial Court reconsidered its Order of 30 May 1985, dissolved the Writ of
Preliminary Injunction, and ordered the dismissal of the case for lack of cause of action.
Plaintiff-appellant appealed to the Court of Appeals, which, as stated at the outset, certified the
case to us on a pure question of law.
In the meantime, with the dissolution of the Preliminary Injunction, it appears that defendant
Bank completed its extrajudicial foreclosure and the Disputed Property was sold at public
auction on January 1986, after a re-publication of the notice of sale, since the first scheduled sale
was enjoined by the Trial Court.
Plaintiff-appellant maintains that:
I.

II.
III.
IV.
V.

The Lower Court erred in dismissing the complaint and lifting the Preliminary Injunction
by relying solely on the admission of the counsel of the plaintiff-appellant of certain
documentary exhibits presented by the counsel of the defendant-appellee.
The Lower Court erred in relying on the case of Wenceslao Vinzons Tan vs. Director of
Forestry which it qualifies as "on all fours with the case at bar."
The Lower Court erred in ignoring the pertinent doctrines in the Supreme Court cases cited
by the plaintiff-appellant in her Opposition to Motion to Dismiss.
The Lower Court erred in holding that notice of the scheduled sale of the land sent to the
agent (CRCP) is also Notice to the principal (Plaintiff Appellant), the land owner.
and prays that she be given "a real day in Court" so that she may testify and give her side
of the case.

Upon the factual and legal context, the errors assigned are without merit.
It is true that the determination of the sufficiency of a cause of action must be limited to the facts
alleged in the Complaint and no other should be considered. 2 In this case, however, a hearing
was held and documentary evidence was presented, not on the Motion to Dismiss but on the
question of granting or denying plaintiff-appellant's application for a Writ of Preliminary
Injunction, Counsel for plaintiff-appellant admitted an the evidence presented. That being so,
the Trial Court committed no reversible error in considering said evidence in the resolution of
the Motion to Dismiss.

disclosing facts sufficient to defeat the claim enabled the court to go beyond disclosure in the
complaint" (LOCALS No. 1470, No. 1469, and No. 1512 of the International Longshoremen's
Association vs. Southern Pacific Co., 6 Fed. Rules Service, p. 107; U.S. Circuit Court of Appeals,
Fifth Circuit, Dec. 7, 1952; 131 F. 2d 605). Thus, although the evidence of the parties were
presented on the question of granting or denying petitioner-appellant's application for a writ of
preliminary injunction, the trial court correctly applied said evidence in the resolution of the
motion to dismiss. ... 3
While, as contended by plaintiff-appellant, some aspects of this case differ from those in Tan, the
doctrinal ruling therein, as quoted above, is squarely applicable to the case at bar. The cases
which plaintiff-appellant cites express the general rule when there is no "documentary evidence
admitted by stipulation disclosing facts sufficient to defeat the claim." Where, however, such
evidence is before the Court and has been stipulated upon, a Court can go "beyond the
disclosure in the complaint." 4
Moreover, the rule is explicit that "rules of procedure are not to be applied in a very rigid,
technical sense; rules of procedure are used only to help secure substantial justice." 5
The evidence on record sufficiently defeats plaintiff-appellant's claim for relief from extrajudicial
foreclosure. Her Special Power of Attorney in favor of CRCP specifically included the authority
to mortgage the Disputed Property. The Real Estate Mortgage in favor of FINASIA explicitly
authorized foreclosure in the event of default. Indeed, foreclosure is but a necessary
consequence of non-payment of a mortgage indebtedness. Plaintiff-appellant, therefore, cannot
rightfully claim that FINASIA, as the assignee of the mortgagee, cannot extrajudicially foreclose
the mortgaged property. A mortgage directly and immediately subjects the property upon
which it is imposed to the fulfillment of the obligation for whose security it was constituted. 6
The assignment of receivables made by the original mortgagee, FINASIA, to Defendant Bank
was valid, since a mortgage credit may be alienated or assigned to a third person, in whole or in
part, with the formalities required by law. 7 Said formalities were complied with in this case.
The assignment was made in a public instrument and proper recording in the Registry of
Property was made. 8 While notice may not have been given to plaintiff-appellant personally,
the publication of the Notice of Sheriff's Sale, as required by law, is notice to the whole world.
The full-dress hearing that plaintiff-appellant prays for wherein she intends to prove that she
tried to contact the President of CRCP to urge him to pay the mortgage loan, that she had failed
to do so despite several attempts; that she did not know that FINASIA had sold its receivables
including that of CRCP to Defendant Bank; and that she was not informed by CRCP of the
scheduled foreclosure sale will not tilt the scales of justice in her favor in the face of
incontrovertible documentary evidence before the Court.
Plaintiff-appellant's recourse is against CRCP, specially considering her allegation that the latter
had failed to observe their agreement.
WHEREFORE, the Order appealed from is hereby AFFIRMED, with costs against plaintiffappellant.

Furthermore, "even if the complaint stated a valid cause of action, a motion to dismiss for
insufficiency of cause of action will be granted if documentary evidence admitted by stipulation
LEGFORMS ALS3C1415 | 44

4.

CALTEX (PHILIPPINES), INC., V. COURT OF APPEALS, G.R. NO. 97753, 10


AUGUST 1992

This petition for review on certiorari impugns and seeks the reversal of the decision
promulgated by respondent court on March 8, 1991 in CA-G.R. CV No. 23615 1 affirming with
modifications, the earlier decision of the Regional Trial Court of Manila, Branch XLII, 2 which
dismissed the complaint filed therein by herein petitioner against respondent bank.
The undisputed background of this case, as found by the court a quo and adopted by
respondent court, appears of record:
1.
On various dates, defendant, a commercial banking institution, through its Sucat
Branch issued 280 certificates of time deposit (CTDs) in favor of one Angel dela Cruz who
deposited with herein defendant the aggregate amount of P1,120,000.00, as follows: (Joint Partial
Stipulation of Facts and Statement of Issues, Original Records, p. 207; Defendant's Exhibits 1 to
280);
CTD
Dates
xxx

Total
=====

CTD
Serial Nos.

Quantity Amount

280
P1,120,000
========

2.
Angel dela Cruz delivered the said certificates of time (CTDs) to herein plaintiff in
connection with his purchased of fuel products from the latter (Original Record, p. 208).
3.
Sometime in March 1982, Angel dela Cruz informed Mr. Timoteo Tiangco, the Sucat
Branch Manger, that he lost all the certificates of time deposit in dispute. Mr. Tiangco advised
said depositor to execute and submit a notarized Affidavit of Loss, as required by defendant
bank's procedure, if he desired replacement of said lost CTDs (TSN, February 9, 1987, pp. 48-50).
4.
On March 18, 1982, Angel dela Cruz executed and delivered to defendant bank the
required Affidavit of Loss (Defendant's Exhibit 281). On the basis of said affidavit of loss, 280
replacement CTDs were issued in favor of said depositor (Defendant's Exhibits 282-561).
5.
On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from defendant
bank in the amount of Eight Hundred Seventy Five Thousand Pesos (P875,000.00). On the same
date, said depositor executed a notarized Deed of Assignment of Time Deposit (Exhibit 562)
which stated, among others, that he (de la Cruz) surrenders to defendant bank "full control of
the indicated time deposits from and after date" of the assignment and further authorizes said
bank to pre-terminate, set-off and "apply the said time deposits to the payment of whatever
amount or amounts may be due" on the loan upon its maturity (TSN, February 9, 1987, pp. 6062).
6.
Sometime in November, 1982, Mr. Aranas, Credit Manager of plaintiff Caltex (Phils.)
Inc., went to the defendant bank's Sucat branch and presented for verification the CTDs declared
lost by Angel dela Cruz alleging that the same were delivered to herein plaintiff "as security for
purchases made with Caltex Philippines, Inc." by said depositor (TSN, February 9, 1987, pp. 5468).

7.
On November 26, 1982, defendant received a letter (Defendant's Exhibit 563) from
herein plaintiff formally informing it of its possession of the CTDs in question and of its decision
to pre-terminate the same.
8.
On December 8, 1982, plaintiff was requested by herein defendant to furnish the
former "a copy of the document evidencing the guarantee agreement with Mr. Angel dela Cruz"
as well as "the details of Mr. Angel dela Cruz" obligation against which plaintiff proposed to
apply the time deposits (Defendant's Exhibit 564).
9.

No copy of the requested documents was furnished herein defendant.

10.
Accordingly, defendant bank rejected the plaintiff's demand and claim for payment of
the value of the CTDs in a letter dated February 7, 1983 (Defendant's Exhibit 566).
11.
In April 1983, the loan of Angel dela Cruz with the defendant bank matured and fell
due and on August 5, 1983, the latter set-off and applied the time deposits in question to the
payment of the matured loan (TSN, February 9, 1987, pp. 130-131).
12.
In view of the foregoing, plaintiff filed the instant complaint, praying that defendant
bank be ordered to pay it the aggregate value of the certificates of time deposit of P1,120,000.00
plus accrued interest and compounded interest therein at 16% per annum, moral and exemplary
damages as well as attorney's fees.
After trial, the court a quo rendered its decision dismissing the instant complaint. 3
On appeal, as earlier stated, respondent court affirmed the lower court's dismissal of the
complaint, hence this petition wherein petitioner faults respondent court in ruling (1) that the
subject certificates of deposit are non-negotiable despite being clearly negotiable instruments; (2)
that petitioner did not become a holder in due course of the said certificates of deposit; and (3) in
disregarding the pertinent provisions of the Code of Commerce relating to lost instruments
payable to bearer. 4
The instant petition is bereft of merit.
A sample text of the certificates of time deposit is reproduced below to provide a better
understanding of the issues involved in this recourse.
SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati
No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23, 1984 FEB 22, 1982,

19____

This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR
THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine
LEGFORMS ALS3C1415 | 45

Currency, repayable to said depositor 731 days. after date, upon presentation and surrender of
this certificate, with interest at the rate of 16% per cent per annum.

a
xxx

(Sgd. Illegible)
(Sgd. Illegible)

AUTHORIZED SIGNATURES 5

Atty. Calida:
q
Mr. Witness, who is the depositor identified in all of these certificates of time deposit
insofar as the bank is concerned?

Respondent court ruled that the CTDs in question are non-negotiable instruments, nationalizing
as follows:

witness:
a
Angel dela Cruz is the depositor. 8

. . . While it may be true that the word "bearer" appears rather boldly in the CTDs issued, it is
important to note that after the word "BEARER" stamped on the space provided supposedly for
the name of the depositor, the words "has deposited" a certain amount follows. The document
further provides that the amount deposited shall be "repayable to said depositor" on the period
indicated. Therefore, the text of the instrument(s) themselves manifest with clarity that they are
payable, not to whoever purports to be the "bearer" but only to the specified person indicated
therein, the depositor. In effect, the appellee bank acknowledges its depositor Angel dela Cruz
as the person who made the deposit and further engages itself to pay said depositor the amount
indicated thereon at the stipulated date. 6

xxx

We disagree with these findings and conclusions, and hereby hold that the CTDs in question are
negotiable instruments. Section 1 Act No. 2031, otherwise known as the Negotiable Instruments
Law, enumerates the requisites for an instrument to become negotiable, viz:
(a)
(b)
(c)
(d)
(e)

It must be in writing and signed by the maker or drawer;


Must contain an unconditional promise or order to pay a sum certain in money;
Must be payable on demand, or at a fixed or determinable future time;
Must be payable to order or to bearer; and
Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.

The CTDs in question undoubtedly meet the requirements of the law for negotiability. The
parties' bone of contention is with regard to requisite (d) set forth above. It is noted that Mr.
Timoteo P. Tiangco, Security Bank's Branch Manager way back in 1982, testified in open court
that the depositor reffered to in the CTDs is no other than Mr. Angel de la Cruz.
xxx
xxx
xxx
Atty. Calida:
q
In other words Mr. Witness, you are saying that per books of the bank, the depositor
referred (sic) in these certificates states that it was Angel dela Cruz?
witness:
a
Yes, your Honor, and we have the record to show that Angel dela Cruz was the one
who cause (sic) the amount.
Atty. Calida:
q
And no other person or entity or company, Mr. Witness?
witness:

None, your Honor. 7


xxx
xxx

xxx

xxx

On this score, the accepted rule is that the negotiability or non-negotiability of an instrument is
determined from the writing, that is, from the face of the instrument itself. 9 In the construction
of a bill or note, the intention of the parties is to control, if it can be legally ascertained. 10 While
the writing may be read in the light of surrounding circumstances in order to more perfectly
understand the intent and meaning of the parties, yet as they have constituted the writing to be
the only outward and visible expression of their meaning, no other words are to be added to it
or substituted in its stead. The duty of the court in such case is to ascertain, not what the parties
may have secretly intended as contradistinguished from what their words express, but what is
the meaning of the words they have used. What the parties meant must be determined by what
they said. 11
Contrary to what respondent court held, the CTDs are negotiable instruments. The documents
provide that the amounts deposited shall be repayable to the depositor. And who, according to
the document, is the depositor? It is the "bearer." The documents do not say that the depositor is
Angel de la Cruz and that the amounts deposited are repayable specifically to him. Rather, the
amounts are to be repayable to the bearer of the documents or, for that matter, whosoever may
be the bearer at the time of presentment.
If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it
could have with facility so expressed that fact in clear and categorical terms in the documents,
instead of having the word "BEARER" stamped on the space provided for the name of the
depositor in each CTD. On the wordings of the documents, therefore, the amounts deposited are
repayable to whoever may be the bearer thereof. Thus, petitioner's aforesaid witness merely
declared that Angel de la Cruz is the depositor "insofar as the bank is concerned," but obviously
other parties not privy to the transaction between them would not be in a position to know that
the depositor is not the bearer stated in the CTDs. Hence, the situation would require any party
dealing with the CTDs to go behind the plain import of what is written thereon to unravel the
agreement of the parties thereto through facts aliunde. This need for resort to extrinsic evidence
is what is sought to be avoided by the Negotiable Instruments Law and calls for the application
of the elementary rule that the interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity. 12
The next query is whether petitioner can rightfully recover on the CTDs. This time, the answer is
in the negative. The records reveal that Angel de la Cruz, whom petitioner chose not to implead
in this suit for reasons of its own, delivered the CTDs amounting to P1,120,000.00 to petitioner
without informing respondent bank thereof at any time. Unfortunately for petitioner, although
the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement
between it and De la Cruz, as ultimately ascertained, requires both delivery and indorsement.
LEGFORMS ALS3C1415 | 46

For, although petitioner seeks to deflect this fact, the CTDs were in reality delivered to it as a
security for De la Cruz' purchases of its fuel products. Any doubt as to whether the CTDs were
delivered as payment for the fuel products or as a security has been dissipated and resolved in
favor of the latter by petitioner's own authorized and responsible representative himself.
In a letter dated November 26, 1982 addressed to respondent Security Bank, J.Q. Aranas, Jr.,
Caltex Credit Manager, wrote: ". . . These certificates of deposit were negotiated to us by Mr.
Angel dela Cruz to guarantee his purchases of fuel products" (Emphasis ours.) 13 This
admission is conclusive upon petitioner, its protestations notwithstanding. Under the doctrine
of estoppel, an admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon. 14 A party may not go
back on his own acts and representations to the prejudice of the other party who relied upon
them. 15 In the law of evidence, whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration, act, or omission, be permitted
to falsify it. 16
If it were true that the CTDs were delivered as payment and not as security, petitioner's credit
manager could have easily said so, instead of using the words "to guarantee" in the letter
aforequoted. Besides, when respondent bank, as defendant in the court below, moved for a bill
of particularity therein 17 praying, among others, that petitioner, as plaintiff, be required to aver
with sufficient definiteness or particularity (a) the due date or dates of payment of the alleged
indebtedness of Angel de la Cruz to plaintiff and (b) whether or not it issued a receipt showing
that the CTDs were delivered to it by De la Cruz as payment of the latter's alleged indebtedness
to it, plaintiff corporation opposed the motion. 18 Had it produced the receipt prayed for, it
could have proved, if such truly was the fact, that the CTDs were delivered as payment and not
as security. Having opposed the motion, petitioner now labors under the presumption that
evidence willfully suppressed would be adverse if produced. 19
Under the foregoing circumstances, this disquisition in Intergrated Realty Corporation, et al. vs.
Philippine National Bank, et al. 20 is apropos:

to another in such a manner as to constitute the transferee the holder thereof, 21 and a holder
may be the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. 22
In the present case, however, there was no negotiation in the sense of a transfer of the legal title
to the CTDs in favor of petitioner in which situation, for obvious reasons, mere delivery of the
bearer CTDs would have sufficed. Here, the delivery thereof only as security for the purchases
of Angel de la Cruz (and we even disregard the fact that the amount involved was not
disclosed) could at the most constitute petitioner only as a holder for value by reason of his lien.
Accordingly, a negotiation for such purpose cannot be effected by mere delivery of the
instrument since, necessarily, the terms thereof and the subsequent disposition of such security,
in the event of non-payment of the principal obligation, must be contractually provided for.
The pertinent law on this point is that where the holder has a lien on the instrument arising from
contract, he is deemed a holder for value to the extent of his lien. 23 As such holder of collateral
security, he would be a pledgee but the requirements therefor and the effects thereof, not being
provided for by the Negotiable Instruments Law, shall be governed by the Civil Code
provisions on pledge of incorporeal rights, 24 which inceptively provide:
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged. The
instrument proving the right pledged shall be delivered to the creditor, and if negotiable, must
be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the thing
pledged and the date of the pledge do not appear in a public instrument.
Aside from the fact that the CTDs were only delivered but not indorsed, the factual findings of
respondent court quoted at the start of this opinion show that petitioner failed to produce any
document evidencing any contract of pledge or guarantee agreement between it and Angel de la
Cruz. 25 Consequently, the mere delivery of the CTDs did not legally vest in petitioner any right
effective against and binding upon respondent bank. The requirement under Article 2096
aforementioned is not a mere rule of adjective law prescribing the mode whereby proof may be
made of the date of a pledge contract, but a rule of substantive law prescribing a condition
without which the execution of a pledge contract cannot affect third persons adversely. 26

. . . Adverting again to the Court's pronouncements in Lopez, supra, we quote therefrom:


The character of the transaction between the parties is to be determined by their intention,
regardless of what language was used or what the form of the transfer was. If it was intended to
secure the payment of money, it must be construed as a pledge; but if there was some other
intention, it is not a pledge. However, even though a transfer, if regarded by itself, appears to
have been absolute, its object and character might still be qualified and explained by
contemporaneous writing declaring it to have been a deposit of the property as collateral
security. It has been said that a transfer of property by the debtor to a creditor, even if sufficient
on its face to make an absolute conveyance, should be treated as a pledge if the debt continues in
inexistence and is not discharged by the transfer, and that accordingly the use of the terms
ordinarily importing conveyance of absolute ownership will not be given that effect in such a
transaction if they are also commonly used in pledges and mortgages and therefore do not
unqualifiedly indicate a transfer of absolute ownership, in the absence of clear and
unambiguous language or other circumstances excluding an intent to pledge.
Petitioner's insistence that the CTDs were negotiated to it begs the question. Under the
Negotiable Instruments Law, an instrument is negotiated when it is transferred from one person

On the other hand, the assignment of the CTDs made by Angel de la Cruz in favor of
respondent bank was embodied in a public instrument. 27 With regard to this other mode of
transfer, the Civil Code specifically declares:
Art. 1625. An assignment of credit, right or action shall produce no effect as against third
persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of
Property in case the assignment involves real property.
Respondent bank duly complied with this statutory requirement. Contrarily, petitioner, whether
as purchaser, assignee or lien holder of the CTDs, neither proved the amount of its credit or the
extent of its lien nor the execution of any public instrument which could affect or bind private
respondent. Necessarily, therefore, as between petitioner and respondent bank, the latter has
definitely the better right over the CTDs in question.
Finally, petitioner faults respondent court for refusing to delve into the question of whether or
not private respondent observed the requirements of the law in the case of lost negotiable

LEGFORMS ALS3C1415 | 47

instruments and the issuance of replacement certificates therefor, on the ground that petitioner
failed to raised that issue in the lower court. 28

to become due, be not paid a third person, as well as in order to prevent the ownership of the
instrument that a duplicate be issued him. (Emphasis ours.)

On this matter, we uphold respondent court's finding that the aspect of alleged negligence of
private respondent was not included in the stipulation of the parties and in the statement of
issues submitted by them to the trial court. 29 The issues agreed upon by them for resolution in
this case are:

xxx

1.
2.
3.
4.
5.
6.

Whether or not the CTDs as worded are negotiable instruments.


Whether or not defendant could legally apply the amount covered by the CTDs
against the depositor's loan by virtue of the assignment (Annex "C").
Whether or not there was legal compensation or set off involving the amount covered
by the CTDs and the depositor's outstanding account with defendant, if any.
Whether or not plaintiff could compel defendant to preterminate the CTDs before the
maturity date provided therein.
Whether or not plaintiff is entitled to the proceeds of the CTDs.
Whether or not the parties can recover damages, attorney's fees and litigation
expenses from each other.

As respondent court correctly observed, with appropriate citation of some doctrinal authorities,
the foregoing enumeration does not include the issue of negligence on the part of respondent
bank. An issue raised for the first time on appeal and not raised timely in the proceedings in the
lower court is barred by estoppel. 30 Questions raised on appeal must be within the issues
framed by the parties and, consequently, issues not raised in the trial court cannot be raised for
the first time on appeal. 31

xxx

xxx

The use of the word "may" in said provision shows that it is not mandatory but discretionary on
the part of the "dispossessed owner" to apply to the judge or court of competent jurisdiction for
the issuance of a duplicate of the lost instrument. Where the provision reads "may," this word
shows that it is not mandatory but discretional. 34 The word "may" is usually permissive, not
mandatory. 35 It is an auxiliary verb indicating liberty, opportunity, permission and possibility.
36
Moreover, as correctly analyzed by private respondent, 37 Articles 548 to 558 of the Code of
Commerce, on which petitioner seeks to anchor respondent bank's supposed negligence, merely
established, on the one hand, a right of recourse in favor of a dispossessed owner or holder of a
bearer instrument so that he may obtain a duplicate of the same, and, on the other, an option in
favor of the party liable thereon who, for some valid ground, may elect to refuse to issue a
replacement of the instrument. Significantly, none of the provisions cited by petitioner
categorically restricts or prohibits the issuance a duplicate or replacement instrument sans
compliance with the procedure outlined therein, and none establishes a mandatory precedent
requirement therefor.
WHEREFORE, on the modified premises above set forth, the petition is DENIED and the
appealed decision is hereby AFFIRMED.

Pre-trial is primarily intended to make certain that all issues necessary to the disposition of a
case are properly raised. Thus, to obviate the element of surprise, parties are expected to disclose
at a pre-trial conference all issues of law and fact which they intend to raise at the trial, except
such as may involve privileged or impeaching matters. The determination of issues at a pre-trial
conference bars the consideration of other questions on appeal. 32
To accept petitioner's suggestion that respondent bank's supposed negligence may be
considered encompassed by the issues on its right to preterminate and receive the proceeds of
the CTDs would be tantamount to saying that petitioner could raise on appeal any issue. We
agree with private respondent that the broad ultimate issue of petitioner's entitlement to the
proceeds of the questioned certificates can be premised on a multitude of other legal reasons
and causes of action, of which respondent bank's supposed negligence is only one. Hence,
petitioner's submission, if accepted, would render a pre-trial delimitation of issues a useless
exercise. 33
Still, even assuming arguendo that said issue of negligence was raised in the court below,
petitioner still cannot have the odds in its favor. A close scrutiny of the provisions of the Code of
Commerce laying down the rules to be followed in case of lost instruments payable to bearer,
which it invokes, will reveal that said provisions, even assuming their applicability to the CTDs
in the case at bar, are merely permissive and not mandatory. The very first article cited by
petitioner speaks for itself.
Art 548. The dispossessed owner, no matter for what cause it may be, may apply to the judge
or court of competent jurisdiction, asking that the principal, interest or dividends due or about
LEGFORMS ALS3C1415 | 48

CONCURRENCE AND PREFERENCE OF CREDITS


1.

CIVIL CODE, ARTICLE 2244

Art. 2244. With reference to other property, real and personal, of the debtor, the following claims
or credits shall be preferred in the order named:
1)

Proper funeral expenses for the debtor, or children under his or her parental authority who
have no property of their own, when approved by the court;

2)

Credits for services rendered the insolvent by employees, laborers, or household helpers
for one year preceding the commencement of the proceedings in insolvency;

3)

Expenses during the last illness of the debtor or of his or her spouse and children under his
or her parental authority, if they have no property of their own;

4)

Compensation due the laborers or their dependents under laws providing for indemnity
for damages in cases of labor accident, or illness resulting from the nature of the
employment;

5)

Credits and advancements made to the debtor for support of himself or herself, and family,
during the last year preceding the insolvency;

6)

Support during the insolvency proceedings, and for three months thereafter;

7)

Fines and civil indemnification arising from a criminal offense;

8)

Legal expenses, and expenses incurred in the administration of the insolvent's estate for the
common interest of the creditors, when properly authorized and approved by the court;

9)

Taxes and assessments due the national government, other than those mentioned in
Articles 2241, No. 1, and 2242, No. 1;

10) Taxes and assessments due any province, other than those referred to in Articles 2241, No.
1, and 2242, No. 1;
11) Taxes and assessments due any city or municipality, other than those indicated in Articles
2241, No. 1, and 2242, No. 1;
12) Damages for death or personal injuries caused by a quasi-delict;
13) Gifts due to public and private institutions of charity or beneficence;
14) Credits which, without special privilege, appear in (a) a public instrument; or (b) in a final
judgment, if they have been the subject of litigation. These credits shall have preference
among themselves in the order of priority of the dates of the instruments and of the
judgments, respectively. (1924a)

LEGFORMS ALS3C1415 | 49